ASIAN STOCK MARKETS MADE A CAUTIOUS REBOUND

KANWAL SALEEM
Sep 03 - 09, 2007

LAHORE: Asian stock markets finally made a cautious rebound on Thursday, as investors kept an eye on US Federal Reserve moves to combat housing woes that have battered global bourses.

Asian markets were in positive territory after a strong recovery on Wall Street overnight but early gains were pared in Tokyo and some other bourses, said Mr. Imran Amjad Khan Chief Operating Officer, Horizin Securities (SMC-pvt) Limited, while talking to PAGE.

According to him, Hong Kong was among the top regional performers, closing up 2.0 percent on hopes for interest rate cuts both in the United States and locally. European share prices were also up in opening trade.

He said the problems in the US mortgage market erupted due to "subprime" home borrowers with shaky credit histories defaulting on their loans. Investors then rushed to cover their losses, triggering fears of a liquidity squeeze. Tokyo closed up 0.88 percent, losing some of its momentum on a modest appreciation of the yen, which makes Japanese exports less competitive. Among other markets, Taipei closed 1.48 percent higher, Sydney was up 0.6 percent, Seoul rose 0.9 percent, Wellington rose 0.57 percent, Shanghai surged 1.14 percent and Manila soared 3.4 percent. Kuala Lumpur rose 0.80 percent, Jakarta was up 0.70 percent and Mumbai was up 0.86 percent. However, Bangkok was flat and Singapore bucked the trend with a 0.41 percent fall.

Mr. Imran Amjad Khan said the fall of the US market caused negative impact on global markets including the Pakistani bourses. However, the country's stock markets were facing internal pressures due to uncertain political scenario.

During the month of August, the Karachi Stock Exchange declined 1500 points mainly due to internal factors, he said, adding that foreign capital of US $207 million have been withdrawn from the country's bourses during the months of July and August.

He advised the Pakistani small investors to stay on sidelines and wait till the political situation is clear in the country.

Chaudhry Muhammad Afzal Rahat, Chief Executive Rahat Securities Limited and Corporate Member of the Lahore Stock Exchange told this scribe that global stock markets recently suffered declines mainly due to mortgaged credit problems in the US. The Pakistani bourses definitely suffered on this account but according to him its impact was meagre.

According to him, Pakistani bourses were facing problems on account of downward rating of Standard and Poor Rating Agency, law and order problem and political crisis.

He asked the investors to invest in fundamentally strong shares because currently the levels are attractive.

CENTRAL DEPOSITORY COMPANY

According to Mr. Hanif Jakura, the CEO of the Central Depository Company of Pakistan, the Depository acts as a custodian; all the shares which were in physical form previously, have been converted into electronic form. Just the way cash accounts exist in banks, security accounts exist in a Depository. The benefit of CDC is that all share transactions can be carried out much more quickly, including the issuing of bonus shares.

He said: ''We provide various services to different types of people, such as investors, companies, the broker community and financial sector. Our major revenue is from transaction fees. In the last few years, we have started another service-Trusteeship for mutual funds''.

Although, the investor base in Pakistan is very low, the government policies and economic growth have helped us in growing our business. The role of the CDC Board is to make policies and give directions and they are doing that and normally the management of the company takes the initiative.

About last two years performance, Mr. Hanif Jakura, who is a Chartered Accountant by profession and assumed his responsibilities as the CEO of CDC in 2002, said at the end of June 2005, there were 17.34 billion shares in the system. Today we have 45 billion shares meaning thereby that 27 to 28 billion shares have been deposited in the Company during the last two years.

The Mutual Fund Industry has helped us to generate more revenues.

According to former Director Administration of the Lahore Stock Exchange, Mr. Afzaal Sharif, Pakistan's Capital Market has become very attractive for foreign investment and the fund managers based at London and New York were showing interest in the Pakistani Market. He said: "the link that was established through listing of some Pakistani companies at LSE will also strengthen through this initiative".

Giving a broad based and multidimensional insight to the Pakistan's economic/social reforms, privatization programme, investment policy, capital market reforms and current macroeconomic overview, Mr. Afzaal Sharif said that in wide ranging tax reforms, there have been significant reductions in tariffs and universal self assessment tax scheme has been introduced, as a result, tax revenues have doubled over the last 7 years and revenue deficit has been eliminated.

In Capital Market reforms, he said that sound regulatory policies aimed at developing a modern and efficient corporate sector and a vibrant capital market with increased capitalization has yielded hugely positive results. Total portfolio investment in Pakistan during 2006-07 has crossed US $ 2.5 billion and the investors' interest in Pakistan Stock Market continues unabated, he added.

According to analysts, March scam of the stock market and sudden collapse of the investors losing billions should be seen in different angles. There are different variables, which are responsible for the March collapse. Blame game should not be at one side, but majority of the blame game goes to decision-making authorities, 80 percent wrong can be attributed to the ill conceived and hasty decision of the management including the regulators while 20 percent blame is to be shared by the buyers, players and brokerage houses.

According to them, the following are also responsible for the downfall of the market, market over weight, over stayed, people saw market euphoria and without realizing the good or bad scrips just went for heavy investments, without sustaining the ready market people went for future market and going for hectic buying in future and creating huge difference which started dumping from ready to future trading, these all are the part of blame game. The most important thing that the liquidity settlement system which was prevailing since decades was replaced over night, due to which liquidity flow turned into liquidity crunch which was done in order to control the over heated market this was a big change which further effected the market.