'Government must act to help stabilize stock market'

M. Bashir Janmohammad, Chairman Westbury Group of Companies and Chancellor-Institute of Business Management (IoBM), has issued the following statement:

Pakistan Stock Market has collapsed in recent time. The government is taking measures to assist the industrial, commercial and various sectors but there are no substantial packages for providing assistance to Pakistan Stock Market with the result that market capitalization has declined from $100 billion to $33 billion, which should be a matter of grave concern. The major reason, apart from Corona Virus, is the disinvestment by foreign and local investors, due to Rupee devaluation, high interest rate and closure of many industries.

The investment climate as a whole will not improve until and unless the stock market stabilizes. In this context, it is considered essential that the Government takes the following measures immediately to stabilize the capital market:-

Monetary Policy Committee has reduced discount rate by only 2.25% to 11%, which is still high for the investors and industries to borrow and make investment in the stock market. Discount rate must come down drastically.

A few months ago, the government decided to establish a Support Fund for stock market through government enterprises like State Life, EOBI, and Banks through National Investment Trust (NIT). However, the same has not been implemented as yet. Market needs a push and these institutions can provide.

It is surprising that the big institutions like EOBI, State Life and Banks having large surplus funds have not invested in the stock market, although Price Earnings Ratio currently is the lowest in the region. Federal Government should ask these institutions to support the market,as returns are high. Government should allow companies like PSO, PPL & OGDC to buyback their shares.

Listed Companies be allowed to buyback their shares and fix limit, which should be upto 70% of their total holding.

The sponsors be allowed to pledge their shares in the banks to create liquidity.

Capital gain on shares be waived off. Anyway, there are huge capital losses and Government will not be able to collect taxes against capital gain.

Tax on Dividend to be reduced to 10%.

As Government has given special package to construction industry such facilities be provided to industries where large workforce is involved like Cement, Steel etc.

Mohammad Bashir said, it is a time for government and Ministry of Finance to act on urgent basis to stabilize the stock market.