KSE seeks Rs 20 billion fund ahead of floor removal: Tarin to take over Finance

[Naveed Yaseen]

AHMED MALIK
KARACHI (October 06 2008): The Karachi Stock Exchange (KSE) has sought government guarantee against a Rs 20 billion market stabilisation fund in case market goes further down ahead of floor removal.

The KSE chairman Kamran Mirza and MD Adnan Afridi along with Securities and Exchange Commission of Pakistan (SECP) Chairman Razi-ur-Rehman held separate meetings with Finance Minister Syed Naveed Qamar and Saudi Pak Commercial Bank President Shaukat Tarin here on Sunday.

Market sources said that Shaukat Tarin is likely to take over as Advisor to the Prime Minister on Finance in next one or two days while the portfolio of present finance minister will be changed and he would be given another portfolio.

The KSE representatives briefed the meetings regarding the current situation of the share market and informed that lack of liquidity remained the main issue during the last few months. They also discussed various proposals to support the market after removal of floor from the exchange.

The KSE board had earlier discussed with SBP to provide liquidity to the market by establishing a market support fund worth Rs 20 to Rs 30 billion. The KSE also proposed the government to provide guarantee to the foreign portfolio investors. The exchange proposed government to ask the foreign holders to hold their shares for one year period. If the foreigners get good value during the year then they can sell their holdings otherwise government will buy shares from foreigners at floor levels and also pay 10 percent premium at the completion of one year.

This guarantee will be only for non-resident investors and will be available for public sector shares only. The KSE and SECP also mulled over making bank financing available to the CFS investors against their CFS holdings. They also discussed a ban on day trading by or for mutual fund companies.

Shaukat Tarin replied that he would inform them of government decision in this regard within three days. The KSE board of directors has scheduled their meeting on Friday, in which they would announce a date for floor removal.

It is learnt that the KSE board is facing heavy pressure mainly from foreign investors to remove the floor mechanism, however, despite this pressure, the board wants to ensure some supportive measures before removal of the floor.

The floor was imposed with effect from August 28 on shares on August 27 closing level to save the investors from further losses. The market had witnessed continuous declining trend during the last few months and the benchmark KSE-100 index had declined by over 41 percent. After the imposition of floor mechanism the market witnessed dull trading activity and trading volumes dropped to over 10 year low levels.

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