KARACHI, Aug 1: The Karachi Stock Exchange expects to raise Rs139 million through the auction of four dormant membership cards.
Of the 200 original memberships— which has remained unchanged since the formation of the KSE over half a decade ago— the bourse has traced out four unclaimed membership cards, the owners of which (believed to be from either the parsi or hindu community) having vanished without a trace since the 50’s.
The KSE now plans to utilize the proceeds from the sale of those cards for improving infrastructure, IT backup systems and acquiring gas fired power generators.
At a press briefing on Friday, the KSE Managing Director, Moin M. Fudda recalled that in response to the bids for sale of those four dormant memberships, 15 offers were received. On July 18, one seat was sold to the highest bidder, Pak-Kuwait Investment Company for Rs34.75 million. He said that the KSE board on July 28, decided to ask the next three highest bidders, namely, Bank Al-Habib Limited; Orix Investment Bank Limited and MI Securities to match the highest bid. The first two confirmed their acceptance on Wednesday, while the other eleven bidders had been told that the last remaining seat was up for grabs until Tuesday. He said that one of the parties, Noman Abid & Co. had already registered their expression of interest.
Mr. Fudda also disclosed that the board had approved expenditure of Rs150 million in the July 28 meeting. Earlier this year, the KSE had plans to spend total of $1 billion as investment in upgrading information technology and setting up the much-needed backup systems. He said that the money raised from the sale of cards would come in handy for fulfilment of those plans.
As the KSE-index had shot up by a staggering 88 points to 4,019 points on Friday, questions were naturally raised by the press as to the reasons for the unprecedented bullish fervour; whether the gains were real or artificial; were foreign investors heading towards the Pakistani equities; the failure to meet deadline of phasing out the badla system and whether the management was doing enough to protect retail investors.
The KSE MD reiterated that heavy flow of funds; limited comparable avenues of investment; encouraging corporate results and sound economy were the reasons for the meteoric rise of stock prices. He affirmed that the management was closely monitoring capital adequacy and exposures and that the fundamentals of risk management were strong. He said that only that day (Friday), the bourse’s software had managed to handle 124,019 trades, which was a record. Significant overseas investment was not being witnessed, though some money was flowing in from the Gulf region.
Replying to a question, whether the bourse was monitoring the price rise of dead and worthless stocks and whether it would not be proper to block the trade in companies with negative equities to protect the unsuspecting small investor, Mr. Fudda said that “legally it was not possible”. He said all that could be done was to place those companies on the defaulters’ counter, where he admitted, trading still took place in scrips.
To another question regarding the phasing out of carry-over trade (COT), commonly known as badla, the KSE MD said that the SECP-KSE co-ordination committee meeting had set June 30 as the deadline for phasing out the badla system and replacing it with margin financing. He said that the delay was a set-back and the increasing badla investment, which had shot up to Rs17 billion with a high badla rate at 14-15 per cent was cause for concern.
He said that on its part, the bourse had set the rules that badla could be extended for 10 days and rates had been capped at 18 per cent for 30 scrips and 24 per cent for the rest. Mr. Fudda said that the State Bank of Pakistan was being looked upon to amend consumer rules of banking and to issue framework on margin financing.
The KSE MD also informed the press that the bourse had set up a relief fund for the victims of rains and floods in Sindh. The KSE Rain Relief Fund committee was headed by Haji Ghani Haji Usman, director on the KSE board. Mr Ghani said that a sum of Rs4 million had been collected as donations from members and the target was to raise Rs7 million. He said that part of the money would be used to provide three-meals-a-day to the devastated families in Karachi for five-six days and the remaining amount would be used to purchase and distribute clothes, chappal and blankets to the homeless people in Badin and Tharparkar.