MOIN M. FUDDA holds
a number of important portfolios. So many, in fact, that one wonders how
it leaves him time for anything else. He is the former Country Chief of
Commercial Union Assurance in Pakistan and immediate Past President of
the Overseas Investors Chamber of Commerce and Industry. He was amongst
the first batch of professionals who were appointed the Directors of
Karachi Stock Exchange (KSE), the biggest of the three national bourses,
in 1998-99 and was appointed its Managing Director two months ago. Mr.
Fudda holds MBA in Insurance & Risk Management from the College of
Insurance, New York and has served as a member of the Board of
Investment, Government of Pakistan and is currently member of the
Privatization Commission of the government. He also served as the
president of the Management Association of Pakistan from mid 1999 to mid
2001 and remained a member of the Board of Governors of the Pakistan
Institute of Management till June 2001. Mr. Fudda is also the Honorary
Consul General of New Zealand for Pakistan.
Pakistani stock markets have absorbed the shock of 11.9 with much
resilience than most of their counterparts across the world. Despite the
initial shock resulting in the closure of the three national bourses for
three days the Pakistani stock exchanges have witnessed growth in last
one year. What can explain the resilience?
It could be attributed to a number of factors including the existing
realities of the market, the introduction and implementation of strict
measures to help improve the corporate governance by the Securities and
Exchange Commission of Pakistan (SECP) and various other fundamentals.
The fact that national bourses offered attractive values and good
returns has definitely played a vital role. And this is still true a
year later today.
about the measures attributed to improved corporate governance?
Improved corporate governance has been instrumental to revive the
investors' confidence by making the procedures, processes and systems
transparent like never before. Companies are now required by law to
publish the quarterly financial results to keep the investors better
posted, enabling them to make informed choices. This is gradually
changing the face of trading from uninformed choices to choices which
are driven by fundamentals alone. For instance, the "Undisclosed
Trading System" introduced at the KSE a fortnight ago provides no
information about the identities of buyers and sellers thus discouraging
any and all manipulations and blind follow-ups previously.
about changes made in the Badla or Carry over Transactions (CoT)?
That too has helped improve the risk management considerably. At the KSE
the period for CoT has been increased from a day to 10 days recently and
it is expected to encourage only the serious trading to help cut the
uncertainty associated with CoT previously. In short, the measure will
bring transparency and serious investment.
What other factors have helped the markets to perform?
Overall the financial performances of the registered companies have been
good and despite the problem of unemployment there is much liquidity in
the market. In addition, the stock markets have also benefited from
absence of investment opportunities elsewhere. Furthermore, the prices
of the scrips are still attractive. The sovereign credit rating is
constantly improving, the foreign exchange reserves stand at respectful
levels of 8.71 billion and the US is in the process of writing-off $ 1
billion loan. The weakening of the dollar has, and is, resulting in
conversion and investment from overseas Pakistanis is also on the rise.
The capital market is the primary beneficiary of this changed economic
scenario, particular in the absence of other investment opportunities
and more so as it offers attractive value and good results.
PAGE: What you
feel should the government do now?
The imminent stalwarts of the Prime Minister elect Zafarullah Jamali
should continue with the economic reforms. This is a must to retain the
confidence of the investors. It is also imperative for the government to
announce its economic agenda by end this year — the sooner the better.
It is also a must to ensure the timely implementation of the policies
because in the governments prior to 1999 implemeted them not only very
slowly but at times against the agenda itself. The continuation of
reforms is a must.
PAGE: The KSE
will be introducing 'Margin Financing' soon. Tell us about it.
Under the 'Margin Financing' scheme the financial institutions will
provide loans to the investors whereby shares could be treated as
collateral. Unlike CoT, Margin Financing will encourage long-term
investment and in the process will strengthen the market.