Floor to remain on KSE
27th October 2008
The KSE board of directors on Sunday decided against removing the ‘floor’ on Monday and said the bourse would continue to function under the existing parameters till the market support fund and put-option were made functional.
KSE Managing-Director Adnan Afridi announced this at a press conference held here on Sunday after the SECP-nominated directors and the KSE board approved this decision at a meeting.
Prior to this, the KSE board, senior members and officials of the Securities and Exchange Commission of Pakistan (SECP) called on Adviser on Finance Shaukat Tareen at his residence here.
The KSE managing-director, however, did not announce a new date for the removal of the floor price mechanism at the conference. It has been two months since the KSE was put under the floor price mechanism, introduced on Aug 27.
The meeting with the adviser on finance noted that many measures, including increase in liquidity in the financial system and additional risk management of leverage products, were not in place, Adnan said and added the mechanism of put-option fund for foreign investors and the NIT-State Enterprise Fund (NSEF) for locals required more time for implementation. However, he did not give at timeline how long it will take to be implemented.
Along with directors and KSE chairman, Afridi maintained that the board will review the progress on market stabilisation measures again on coming Friday (Oct 31) in the presence of Shaukat Tareen, who has accepted the invitation to visit it for the first time since his appointment as adviser.
Responding to a query, he said, “The government is not pressuring us to lift the floor as soon as possible, instead it is supporting the KSE to maintain it (floor).”He stressed that the market would continue to work under the existing parameters till 100 per cent market stabilisation measures were put in place, as were agreed with the SEC the other day.
Earlier, the SEC assured market representatives of creating a Rs20 billion market support fund by the government, which was termed NIT-State Enterprise Fund (NSEF) at the conference for the first time. This fund was made to rescue local investors, but it will be injected only in nine companies listed on the KSE.
These are: Oil & Gas Development Company (OGDC), Pak Petroleum Limited (PPL), Pakistan State Oil (PSO), Sui Southern Gas Company (SSGC), Sui Southern Gas Pipeline Limited (SNGPL), Kot Addu Power Company Limited (KAPCO), National Bank of Pakistan (NBP), Pakistan Telecommunication Company (PTC), and Habib Bank Limited (HBL).
The SEC also informed the KSE that the government had agreed to issue a separate sovereign guarantee of Rs30 billion for those foreign investors, who would opt for ‘put option’ for one year. This means the government would compensate foreigners if they receive losses at the completion of one year period in the above announced nine securities.
The KSE managing-director reaffirmed that funds in the NSEF will be injected only in nine eligible securities and the government has a right to rescue companies run by it. These nine companies, however, are also included two privatised entities, i.e., the PTCL and the HBL.
“We want to make the under construction fund, i.e., NSEF entirely different from Equity Market Opportunity Fund (EMOF) and still are deciding modalities and way of working of this fundî, Adnan responded.
EMOF was established by Finance Minister Naveed Qamar a couple of months back at KSE with an initial size of fund at Rs20 billion. The purpose of this fund was same as is of NSEF to rescue the market. But later on EMOF received just four billion to five billion rupees from its participants. Moreover, the received funds were also not injected in market when was needed.
Source: The News