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 Politics & Policy





Shahid Ghaffar

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 Pakistan.

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.