KSE matures for Morgan Stanley Composite Index: market capitalisation at $23 billion

The Karachi Stock Exchange (KSE) on reaching $ 23 billion in terms of market capitalisation has become an eligible bourse for Morgan Stanley Composite Index (MSCI), giving comfortable level for foreign investors to place funds in high-yielding stocks.
This was stated by Arif Habib, Chairman of the KSE, in a press briefing on Saturday after the 100 index of the local stock market reached a new milestone touching the coveted level of 5000 points.
The KSE chairman said that the board of directors of the KSE would hold a meeting to devise ways to sustain 5000 points level and prepare tools to win the confidence of the retail investors.
He said: "Our main objective is to mobilise funds at the local stock market and boost the share values. It would help other industrial units to list their entities at the stock market.
Moreover, the fund raised through public subscription would generate economic activity, create jobs, improve revenue collection, rise in exports, cut in deficit and enhancing the quality of life of the people.
He said that the stock market has risen from 1300 points to 5000 points on Friday, showing a tremendous improvement of 270 percent in 26 months, while market capitalisation soared to $ 23 billion to $ 5 billion. "Since the development at the stock market the aim was to cross the $ 20 billion mark which would help foreign investors to comfortably park their funds in the local market," Habib said.
"Moreover, entry of our stock market at the Morgan Stanley Composite Index would help enliven more interest from overseas fund managers," he added.
The rise in valuation was made possible because of significant growth in the economy, where foreign currency reserves touched new heights, continuous flow of exports, rise in revenue collection and stringent measures taken by the KSE management and the regulator--Securities and Exchange Commission of Pakistan (SECP).
He said that during last couple of years the market was mostly driven by the local investors which was consolidated after active support from financial institutions placing large sums of their funds in the local bourses.
Habib said that KSE's main objective after achieving new feat is to develop and educate the retail investors.
"We foresee that institutions would soon launch mutual funds, catering the ever-increasing demand of small investors through professional mechanism guiding the people where to invest or not."
Responding to a question, Habib said that there is ample liquidity in the system, which could be gauged from the recent offloading of government shares through stock market.
The subscription received for the issue of OGDC was Rs 28 billion as against the offer of Rs 6.8 billion, while in case of SSGC new record was created as over 150,000 applications were received to buy stake in the gas company.
He said that to sustain growth, the KSE has also designed mechanism to reduce listing fees, transaction fees and would also suggest to the government to cut tax rate for listed companies and for fresh listing, and reduction in withholding tax on company dividends.
Moin Fudda, managing director of the KSE, said that since January the index has climbed 11.8 percent while in the same period a number of regional markets have received correction.
He said that the market would soon see listing of some of government entities. The shares in Pakistan Petroleum Limited would be sold through stock exchange by May, and Kot Addu Power Plant by June.
He said that in last six months the exchange has witnessed listing of a number of companies from the private sector and hoped that it would continue as Bank Al-Falah, a telephone company-Callmate, a television channel and terms finance certificates from private companies are expected to get listed.
He appreciated the role of print and electronic media and added that their continuous support and release of news on different aspect of the market built up the profile of the market.
Fudda said that "daily we saw articles appearing in the newspapers highlighting the developments in the listed companies and other news making inroads".
He said: "We have recently introduced trading in the odd lots and now even a single share is easily sold or bought without any discount. Soon we would start 'Over The Counter' (OTC) market in which the existing listed companies or new scrips would be listed having small paid-up capital".
The exchange has entered into an agreement with some of the electronic channels to relay live share prices, a move to increase the participation of retail investors. The exchange is also making efforts to launch internet trading which would help investors in small towns and districts of the country, as well persons sitting overseas, to easily route through the internet trading executing deals at the local market.
At present the dividend yield is hovering at 6 to 7 percent which is still compared with rates offered on treasury bills and government securities, Fudda said.
The earnings of the listed companies have shown tremendous growth in last couple of years, and under low interest scenario and jump in consumer demand, the growth is likely to be maintained during 2004.