KSE decides to postpone floor removal

[Naveed Yaseen]

AHMED MALIK
KARACHI (October 27 2008): The Board of Directors of Karachi Stock Exchange (KSE) has decided that the floor mechanism set on share price will remain in place until the government funds and PUT option mechanics are finalised. The board did not give any date for removal of floor.

The KSE board of directors announced this after its meeting with Advisor to the Prime Minister on Finance Shaukat Tarin and Chairman of Securities and Exchange Commission of Pakistan Razi-ur-Rehaman here on Sunday.

While briefing the media, the MD of Karachi Stock Exchange Adnan Afridi said that the board will review the progress and after that any date could be announced regarding removal of the floor mechanism. Chairman KSE Board Kamran Mirza and directors Shoaib Memon, Dawood Jan Muhammad, Munir M. Ladha, M. Sohail Dayala, Usman Asghar Khan and Khalid Sherwani were also present on this occasion.

He pointed out that Shaukat Tarin would visit the KSE on Friday to review the progress made to date in this regard and to interact with the KSE members. Earlier, the board of directors of Karachi Stock Exchange held a meeting with Shaukat Tarin, Advisor to Prime Minister on Finance. Senior members including Arif Habib, Jahangir Siddiqui, Haji Ghani Haji Usman, Siddiq Dalal and also met the Advisor and discussed the prevailing situation of the Karachi stock market and the issues related to floor mechanism and liquidity crunch situation.

In the said meeting, the market stabilisation measures were reviewed and it was noted that many measures including increasing liquidity in the financial system, additional risk management of leverage products, were in place.

However, the mechanics of the PUT option fund and the NIT-State Enterprise Fund still required additional time for implementation.

In light of this, the KSE board decided that the floor mechanism should remain in place until the government funds and PUT option mechanics are finalised. The KSE board appreciated the commitment and ongoing support extended by the government, in particular Shaukat Tarin and Razi-ur-Rehman Khan, Chairman-SECP to resolve the issues being faced by Pakistan's capital markets.

Replying a question, Adnan Afridi said that government of Pakistan, Ministry of Finance, SECP and Karachi Stock Exchange are working together to resolve the issues. However, he said that it would take time to finalise the put option and to establish NIT-State Enterprise Fund.

He pointed out that NIT would appoint a foreign consultant to finalise the put option. He also said that a special session would be held any time during the week, to buy shares stuck up in the CFS market.

On another question, Adnan Afridi said that the government has a right to invest its fund in its own companies as the fund is being provided by the government institutions. He said that the government has a right to protect its companies.

He said that the fund will invest in nine scrips including OGDC, Kot Addu Power Company, PPL, Sui Southern Gas Company, Sui Northern Gas Pipeline, PSO, National Bank, PTCL and Habib Bank.

The floor mechanism on share price was imposed on August 27, 2008 to avoid further losses as the share market was witnessing continuously declining trend. However, after imposition of floor, the trading activities had reduced as the average ready market volume had declined to 0.187 million shares.

The KSE had announced that the floor will be removed on October 27, 2008, however, the board had to extend it as the mechanics of the put option fund and the NIT-State Enterprise Fund still required additional time for implementation.

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