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The Senate body on Revenue and Finance, following a meeting with the management of stock exchanges, endorsed a fund of Rs 50 billion for capital market here on Thursday.
"This is the unanimous decision of the committee that the money is important for the restoration of confidence," Chairman of the Standing Committee Senator Ahmed Ali told the media. He said that Rs 30 billion would be for portfolio investment and Rs 20 billion for local investment in the stock market.
He said the committee found nothing that could have that proved local investors were involved in portfolio investment through offshore companies, and added that the government had complete details of the companies, which have invested in Pakistan stock market.
The committee appreciated the establishment of new Rs 20 billion open-end fund being managed by the NIT. In addition to the market operation of the fund, the fund is being provided with Rs 30 billion government guarantee to enable it write put options on the seven state-owned entities. Responding to a question, he said the committee was in conformity with the investors and management of Karachi, Lahore and Islamabad stock exchanges that the banks interest rates must be brought down to avoid a collateral damage of the businesses.
He dismissed the impression that the IMF loan facility would be conditional with the increase in spread rate as the government had assured them that the interest rate would not be increased. Earlier, during the meeting of the committee, Advisor to Prime Minister on Finance Shaukat Tarin said that these problems were created through speculations. He said that free market was the only solution to the problem, but it never meant the control be given in the hands of a few people.
The meeting was told by the management of Karachi Stock Exchange that total portfolio investment is 20 to 25 percent of the total free float market. The foreign investors still held two billion dollars, they said, and added that the government investment with 25 per cent share in the market stood at 9.2 billion dollars of the total 38 billion-dollar market value.
The meeting was told that Rs 20 billion fund was made for seven companies and it would be managed by the National Investment Trust (NIT), while Securities Exchange Commission of Pakistan (SECP) would be overseeing it. The major companies for which the fund would be set up are Kapco, SNGPL, SSGC and OGDCL, and priority would be given to small shareholders.

Copyright Business Recorder, 2008

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