KARACHI, July 10: The Securities and Exchange Commission of Pakistan and the Karachi Stock Exchange held a meeting with institutional investors to discuss the concept of an ‘Equity Market Opportunity Fund’ (EMOF), a statement separately released by the Communication Officer, SECP and the Public Relations department of KSE said.

The apex and frontline regulator stated in their similar worded statements that the institutional investors had appreciated the efforts of SECP and KSE in regard to the EMOF and were supportive of the Fund concept and its need.

The regulators observed: “They (institutional investors) require a few days time to understand the details and indicate the amounts they may be willing to commit to the Fund”. They were also said to have emphasised their ongoing participation in the equity markets.

The regulators concluded that the SECP would intimate the status after the next meeting with the institutional investors which was tentatively scheduled for July 16.

“If agreement is reached amongst the institutional investors and sufficient financial commitments are received then the fund is likely to be launched over the next two weeks”.

The ‘concept paper’ on Equity Market Opportunity Fund has been posted on the KSE website. Some of the salient features of the paper include the following: The preamble begins with interesting observation: “Among global constraints, the Pakistan equity market also suffers due to imperfect and incomplete information flow, currency weakness and media speculations about chaotic political situation and deteriorating law and order, which lead to negative sentiments among investors about the economic fundamentals”.

The paper goes on to say that the economic fundamentals of Pakistan listed securities, with respect to current profitability and medium-term growth remained bright.

“Many securities are trading at low p/e ratios due to ‘margin selling’ as opposed to their intrinsic values,” the paper stated and added that the dislocation of real and perceived values created an opportunity for a long term institutional investor.

The concept paper noted that Pakistan was not the first developing nation to benefit from state sponsored funds, which served to stabilise their respective markets. Other markets were noted to be: India, Taiwan, Hong Kong, Thailand and Korea.

“It is proposed that an EMOF be established, which is considered to be the most institutionalised way for market intervention by regulators/governments in a formalised fund structure, having approved preset rules of operation,” the paper stated and added that the objective of the fund was to reduce volatility by acting as shock absorber and not as means to prop up the market or any scrip price.

The concept paper, which spans over numerous pages, can be viewed on the KSE website: www.kse.com.pk