KARACHI, Aug 2: The Chairman, Karachi Stock Exchange, Arif Habib described the tremendous growth of KSE in the previous two-and-half years, indicating that during the period, the KSE 100 Index had appreciated by over 300 per cent
, market capitalization had shot up by 400 per cent and average daily turnover had scaled by 300 per cent.
Welcoming the Governor State Bank of Pakistan, Dr. Ishrat Husain at a meeting with the Board of Directors and past presidents/chairmen here on Monday, Mr Arif Habib acknowledged continuous support of the SBP governor for the development of capital markets, said a press release issued by the KSE.
In this connection he mentioned assistance in various matters relevant to repatriation of foreign portfolio sale proceeds funds, development of mutual fund industry and investment by commercial banks in the equity market.
The KSE chairman stated that credit also went to the positive economic policies of the government. "The SBP played key role in these achievements", said Mr. Arif, adding that it was because of SBP policies that interest rates had decreased to mid single digit from high tense, value of the rupee had stabilized, foreign exchange reserves had multiplied manifold and above all the banking sector had become healthier which was reflected by their share prices in the market.
He said that the future of financial sector looked to be very positive for which SBP Governor deserved kudos. "KSE is now in a position to provide cheap finance to industry, market liquidity and efficient price discovery system", said the KSE chief.
However, he said that despite all this, listings of the companies on stock exchanges had been very slow which was mainly due to non-availability of any tax incentives for the listed companies as was in the past.
He said that while the KSE had already reduced listing fees by almost 40 per cent, it was now for the government to restore tax incentives for listed companies. He said that the bourse would shortly be starting the OTC market operations which would provide opportunity to the small cap companies to seek listings.
Similarly, efforts were under way to encourage retail investments for which the exchange was encouraging on-line trading by creating necessary infrastructure. Initiative had also been taken to develop programmes for investors' education.
The chairman said that the outlook on the securities market was positive due to attractive price earning ratio multiple of 11 that was lowest in the region. He also appreciated the decision of SBP to list government paper on the stock exchanges and assured all possible support by KSE, CDC and NCCPL.
Speaking on the occasion, Governor State Bank Dr. Ishrat Husain said that as a matter of policy, he liked to interact with key players of financial sector, besides business and industry. He said that the KSE was an important national institution and that it was playing its important role.
He said that since the time he assumed the office of the Governor-SBP, equity market had become more transparent providing better disclosures, better risk management measures, exposure limits according to international standards, introduction of T+3 system etc.
He said that government had fulfilled its role by introducing positive investment policies as well as privatization of government enterprises. Dr. Ishrat said that National Commodity Exchange was also an important institution that provided a futures market in commodities. "I look forward to an early commencement of its operation", he said.
Referring to the market development, the SBP governor emphasised the need of introducing and updating technology, saying "We should be ahead of curve of the technology". He also advocated introduction of on-line trading which would not only expand investor base, but would also increase business.
He pointed out that Pakistan's financial sector looked like a closed shop for an elite class and needed to be opened up for small and middle class investors. He said that the funds of over Rs900 billion which were invested in National Savings Schemes could be channelized into the equity market due to reduction in rates of profits as well as restriction on large corporate investors to invest their funds in those schemes.
He said the conduit was now closed and there were new openings for investors in the form of investment in Mutual Fund industry, Provident Fund and Pension Fund and that there was a need to attract those funds.
The SBP governor appreciated various efforts being made for listing of new companies and said that he fully supported the view that listed companies should be allowed some tax incentives especially in view of the corporate governance. He said that he would continue to support that policy at all levels of government.
Similarly, he said that OTC market was the need but at the same time, he suggested that listings on that market should be cost effective with bear minimum listing requirements and that it should be open for all companies.
With regard to the investors' education, he said that it was an important area and needed to be provided through some institutional arrangements by way of creating a subsidiary company of stock exchanges.
Referring to monetary policy statement for current half year about movement in interest rates and exchange rates, he said that some people were probably over reacting. Those movements were normal in the context of higher growth rates. "There should be no concern whatsoever", he said, adding that the country would see a sustainable high growth rate for a long time.
