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For the last two weeks or more the lower cap in the stock market has been frozen. On the whole this step was welcomed and no negative voice has been heard. The only argument is that it will give a bad signal to foreign investors. This is true that they will not come back soon, but will take some time, months or year.
Secondly, the prices are at rock bottom level both in terms of dividend yield and price earning ratio, prices below these will be catastrophic and may end KSE business for a long time. Recently many countries took steps to save their stock markets directly or indirectly. Japan injected 19 billion dollars, USA 240 billion dollars to save banks and insurance companies so as to save stock market, Russia closed it stock market and UK has banned short selling till January 2009. So extraordinary challenges need radical steps.
In the next phase, it should continue to remain frozen till after Eid and then reviewed, unless we get some good news from USAId, Saudi oil facility etc. So opening the cap in haste will be the beginning of end of KSE for a long time. In the meantime, share buy-back should be encouraged specially from small investors.

Copyright Business Recorder, 2008

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