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ECC expected to approve Rs25bn stock market support fund

Updated May 30, 2019

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The proposal in this regard has been forwarded by the Ministry of Finance to the ECC. — AFP/File
The proposal in this regard has been forwarded by the Ministry of Finance to the ECC. — AFP/File

ISLAMABAD: The Economic Coordination Committee (ECC) is likely to approve the proposed Stock Market Support Fund on Thursday in a bid to boost investors’ sentiments.

The proposal in this regard has been forwarded by the Ministry of Finance to the ECC, which under Dr Hafeez Sheikh is expected to approve the Rs25 billion market support fund.

It recommended the establishment of two capital market support funds to be maintained by an asset management company (AMC) and buy shares of government-listed companies.

Meanwhile, an official in the finance ministry told Dawn that the fund’s structure will be similar to the market support scheme introduced by the government after 2008 stock market crash.

However, it was not clear if a new AMC will be established for the purpose or any existing company will buy the shares of state-owned entities.

When contacted, the spokesman of finance ministry did not respond.

The demand for government support to stabilise the capital market of the country was presented to Finance Adviser Dr Abdul Hafeez Sheikh during his visit to the Pakistan Stock Exchange (PSX) on May 17.

The decision was finalised after his meeting with all stakeholders including brokers, officials of Central Depository Company, National Clearing Company of Pakistan Ltd and the State Bank.

The working paper of the fund highlighted that one market support fund will be valued at Rs20bn to be financed by National Investment Trust (NIT) and other institutions including Pakistan State Oil, National Bank, Oil and Gas Development Company.

“This fund will purchase shares of major public sector scrips, while the other fund will be worth Rs5bn to be financed by mid-level institutions to buy shares of small government-listed companies,” said an official of the finance ministry.

The officials added that certain taxation measures were also the on cards to make investments in capital markets attractive in the wake of rising interest rates. “These measures will not only give a boost to activity in the market, but also invite fresh investments.”

Meanwhile, the stockbrokers too have expressed confidence that this move coupled with other developments will help stabilise the market, but added that the real impact of new market support fund will be visible after Eid holidays.

“There are only two working days for the stock market - Thursday (today) and Monday - as Friday is a non-working day and Eid holidays start from Tuesday,” one broker said, adding “The May futures contracts will mature during these days and it is expected that the shifting to June contracts will be at higher rates.”

The broker added: “There was a serious lack of confidence among brokers and PSX chief Richard Morin, now his resignation will help boost our confidence too.”

The brokers project that the market will sharply rise between 3,000 and 5,000 points soon after the budget is presented on June 11.

Published in Dawn, May 30th, 2019