PM wants smiles back at Karachi Stock Exchange
Pakistan Times Business & Commerce Desk

KARACHI: Prime Minister Shaukat Aziz has advised the managers of the Karachi Stock Exchange to go to the bottom of the matter ascertain the real causes which led to the unusual crash and losses to the investors. The Prime Minister said he wants smiles back at Karachi Stock Exchange.

The advice came when the Prime Minister met the delegation of the senior officials including Moin M. Fudda, Managing Director of the Karachi Stock Exchange at the Governor House Tuesday night.

Moin Fudda, while giving details of the PM’s observation over the recent market crash, said that Scurrility and Exchange Commission of Pakistan has also been assigned the task to unearth the real factors behind the recent debacle at the Karachi Stock Market, if the people were found involved in any form of maneuvering would be duly dealt with.

“We have to learn lessons from such events to avoid recurrence of such a situation” PM remarked. Prime Minister Shaukat Aziz spelling out the economic turnaround and the growing economic fundamentals, he said that the economy was well poised to hit 7 per cent growth rate which have placed Pakistan as one of the ten countries of high growth rate.

In order to attain sustainable growth rate, his government was about introduce second generation reforms in different segments of the economy including the capital market as well. The Prime Minister while giving his own analysis over the recent crash of the market observed that it was probably due to undue acceleration of the index and the future speculation and Badla trading which were the factors behind the problem.

Sindh Minister of Industries Adil Siddiqui has opined that the members, who had made Rs 20-25 billion in the recent crisis should return a portion of their profit to those who had lost heavily in the market during last week.

Talking to the top Karachi Stock Exchange players at the Sindh Governor’s House the Premier said that the market had undergone undue acceleration and the downslide was also steep.

We will investigate the causes for this, however, it is imperative that the Securities & Exchange Commission of Pakistan, board of directors of the exchanges and the members collectively play their role to smoothen out the affair and take corrective step on a fast track basis.

He said that that common man was not impacted by the recent crash in the exchanges. SECP Chairman Dr Tariq Hassan said that the recent crisis has damaged the credibility as well as the integrity of the system and repair has to be done.

KSE Managing Director Moin Fudda lamented that he did not get the proper support from the members to strengthen the risk management system. He said that he had to struggle for over a year to get permission to buy and install pre-trade verification hardware and software.

“There have been four attempts by the general body to reverse the fifty two weeks mechanism for estimation and collection of loss exposure,” said Fudda.

Meanwhile, addressing a press conference at Karachi KSE President said the March crisis, which played havoc to the Karachi Stock Market, is now over and the dust settled with the settlement of the deliveries for which the consortia of the institution lent a helping hand and clearance of Badla for future contracts by the banking system.

While pin pointing the possible reasons behind the crash Moin M Fudda said that over stretched long positions by weak buyers in March Futures Contract besides high speculation in March Contract in the hope that prices will further increase resulting in increase in spread between Ready and Futures.

He said that the sellers in March contract were carrying hedged positions from Ready Market and were not interested in squaring up in March contracts; however the situation went to worst when funds from COT were also withdrawn by the financial institutions.

The KSE chief however paid growing tributes to some leading security houses including Jehangir Siddiqi, Arif Habib, Aqeel Karim Dehdi and other senior colleagues to play an important role in delivery and COT settlements.

Moin while dialating upon unusual surge which helped KSE-100 index crossed the 10,000 points mark and crash taking down the index to 7708 points only in a short span of 15 trading sessions, observed that fluctuations at such a high scale is usually not witnessed elsewhere around the world.

He said that the risk management regulations especially regarding future contract have been already moved for effective amendments to avoid recurrence of such eventualities in future. He expressed the hope that effective rules will discourage high speculative trading specially in future trade.

The payment of Rs 27 billion by the consortia for the deliveries gave a kick start to the stock market returns to its early fast track on an extremely positive note sounded by the major scrips such as MCB and FFC opening at their upper circuit levels here on Wednesday. At the end of the day, the KSE-100 index posted 229 points gain to the 8084 level as against 7853 points previously. The market was spurred by institutional buying which continued to extend reinforcement with fresh investment making its way in undervalued counters and blue chips.

The rise continued throughout the day with positive activity seen across-the-board. PTCL and PSO spearheaded the massive rebound and shares of the banking, fertilizer and cement sectors quickly followed suit. At one point every major stock barring OGDCL had soared to its maximum upper limit.

This triggered some spark in OGDCL. The infamous energy giant recovered from its Rs117.40 lower lock to make a high at Rs130.40, marginally short of its upper circuit level.

The KSE-100 index was massively boosted by almost 500 points, making an intra-day high at 8344 points. Nonetheless, in the final few minutes of trading, OGDCL dramatically plunged to its lower circuit level (an intra-day decline of 10%), thereby dragging the KSE-100 index down by roughly 250 points. Since the settlement process has been successfully completed offsetting the adverse situation the market players are of the view that the market is to maintain its ascending path in the days to come.●