Oct 22 - 28, 2001
Mr. Shahid Ghaffar has recently been elevated to the
position of Commissioner in the Securities and Exchange Commission of
Pakistan (SECP). He has been working for the Commission as Executive
Director (Securities Market Division) since August last year. Before his
present appointment, he has worked as Executive Vice President in NIT
and then as Managing Director, Karachi Stock Exchange. He holds a
Masters Degree in Business Administration and has attended the
prestigious three-week course of "Securities Markets Development
and Regulation", organized by the U.S. Securities and Exchange
Commission, in Washington, D.C. He has wide exposure to all aspects of
securities market operations and stock exchange regulation. Besides his
relevant qualifications and experience, Mr. Shahid Ghaffar has played a
major role in implementation of recent capital market reforms in
Q. There is a common perception that the stock
markets in Pakistan are manipulated by a group of big and influential
brokers. The rise and fall in the prices of scrips is more because of
their preconceived notions/decisions. What are your views?
A. There is no doubt that there exists such a
perception that the stock markets in Pakistan at times manipulated by
big operators. There are several reasons for this. The market is narrow
and activities are concentrated to few scrips. Also there are several
small companies, which are very closely held and floating stock is
limited. The monitoring and surveillance of Stock Exchanges is also not
that effective. All above factors combined together make manipulation
easier. The SEC is fully conscious of the fact and in order to check
manipulation has set up a Surveillance Wing to monitor any abnormal
activity. The Commission has also taken steps to improve the governance
of the Exchanges. Along with this risk management measures has also been
introduced. The blank selling has also been banned. All above steps has
helped in checking manipulation to some extent. We intend to further
strengthening our investigative capacity which will help in arresting
manipulative activities in the market in an effective manner.
Q. How would you explain the recent surge in
the market when the regional scenario is highly depressing and hardly
conducive for enhanced economic activity?
A. Everywhere in the world the behaviour of
the market is normally dependent on sentiments of future perception
rather than on economic fundamentals. Further, stock market in Pakistan
has been depressed for a long time and the share prices were extremely
low and there are several shares which were offering dividend yield of
20% and above besides offering prospects for capital gain. However,
investors were shy to invest in the market because of prolonged bearish
trend. Recently, the de-dollarisation of economy and lifting of
sanctions by the USA and European countries, and selective buying by
institutions have helped removing hangover of weak holders and has
improved improving market sentiments. Based on the fact that shares
prices of fundamentally good companies are available at attractively low
values, it is hoped that market might soon get out of the bear trap.
Q. Reportedly there was a lot of resistance in
the initial stages when T+3 system was introduced in stock market. It
seems to have subsided by now. How it happened and has the goals of
introduction of T+3 achieved?
A. There is always resistance to reforms.
There was a feeling among market participants mainly brokers that with
the introduction of T+3 system the turnover will decline the factual
position today is that after successful implementation of T+3, turnover
has actually improved significantly. The very fact that after September
11 incident when the share prices fluctuated widely, there was no
serious threat to market integrity. The implementation of T+3 system
along with other risk mitigating reforms implemented earlier have proved
to be effective.
Q. How the futures trading is progressing?
When you plan to introduce it in Lahore and Islamabad Stock Exchanges?
A. When future trading was introduced, there
was not much activity. However, future trading has now started
improving. Since this is a new product, participants and investors are
taking time to understand the new product. It is expected that trading
in futures will improve. The LSE is also working on future and intend to
introduce it shortly.
Q. Share Buy-Back Rules were recently relaxed
by the SECP. What was the main objective of extending this facility and
how for it has been achieved?
A. The Share Buy-Back Rules were recently
relaxed to make it more realistic and to remove irritants, which were
hindering buy-back of shares by the management. The objective of the
changes was to make these rules more realistic.