By Syed M. Aslam
Nov 25 - Dec 01, 2002

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.

PAGE: The 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?

MOIN FUDDA: 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.

PAGE: What about the measures attributed to improved corporate governance?

MOIN FUDDA: 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.

PAGE: What about changes made in the Badla or Carry over Transactions (CoT)?

MOIN FUDDA: 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.

PAGE: What other factors have helped the markets to perform?

MOIN FUDDA: 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?

MOIN FUDDA: 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.

MOIN FUDDA: 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.