October 25th, 2008KSE brokers ask for more!
In a noisy gathering at the Karachi Stock Exchange trading hall on Thursday, the 80-plus stock brokers present came up with a small list of demands (they like to call them ‘proposals’), which they handed over to a KSE director to be placed before the meeting of the Securities and Exchange Commission of Pakistan and the stock exchanges on Friday.
The Friday’s meeting between the regulators was considered to be of considerable significance as it would mark the final deliberations prior to the removal of ‘floor’ from under the KSE-100 index of 9,144 points on Monday (Oct 27).The broker fraternity at the Thursday’s general body meeting expressed relief at the government’s intervention to prevent the possibility of a fearful fall of the stocks following the pulling of planks from under the ‘floor’ on Monday.
But that did not prevent brokers from asking for more. Firstly, they demanded that the equity market support fund of Rs20 billion be activated (in special sessions) prior to the removal of floor.
Second, they said that local investors should be given a share of half of the Rs30 billion ‘put option’ guarantee by the government for a year as announced on Wednesday, for the non-resident investors.
The Rs20 billion fund such as was created by the government for foreigners, was also asked to be made available for local investors.
The brokers wanted assurance that the funds announced on Wednesday would be fully invested in the market, unlike the Stock Market Opportunity Fund of Rs20 billion, set up earlier, which was understood to have picked up stocks valuing just about Rs5 billion.
And finally, the brokers who stood a signatory to the demand of a ban on ‘badla’, expressed their displeasure over the regulators refusal to do so at this point in time.
----------Advertisements------------Later the advisor to the Prime Minister on Finance, Mr Shaukat Tareen, held a press briefing in Islamabad, with the SECP chairman Razi-ur-Rehman Khan sitting by his side.
The advisor repeated the market bailout package of Rs50 billion announced by the regulators on Wednesday and analysts thought that the briefing was meant to express government’s approval.
“We are playing a proactive role,” the advisor said.
Mr Tareen stated that the government would look after seven stocks of the state-owned entities (OGDC, Kapco, PPL, SSGC, SNGPL, NBP and PSO) in which the support fund of Rs20 billion would be invested and ‘put option’ provided to foreigners. The advisor identified four institutions as contributors to the market support fund. Each would be chipping in Rs5 billion: NIT; EOBI: State Life and NBP.
He said that the private sector might also start building up support funds and with a yield of 14 to 16 per cent, the Pakistani equities were attractive. He said that the ‘badla’ had been restructured so that no bubble was formed.
MUTUAL FUNDS: The advisor to PM announced government’s guarantee for ‘A’-rated TFCs for one year, which he said was to stabilise the mutual fund industry.
Analysts said that the fixed income market of the size of Rs120 billion might have come under pressure in case of large-scale requests for redemptions, but the impact would now be cushioned as credit lines would be available from banks.
It could not be ascertained whether the incentive would also be available for the NBFIs, but the step was widely acknowledged as in the right direction.
