The present government has a firm commitment to develop and further strengthen the capital market of the country on sound footings, and more reforms after demutualization of market would come to increase investor base, said Finance Minister Shaukat Aziz.
Inaugurating 'InvestForum', an investment company at Islamabad Stock Exchange, headed by Iqbal Farid, a former Chairman of Revenue Board, he said that efficient, transparent and strong bourses have an important role to play as catalyst in capital formation. They channelise the national savings into productive avenues of the economy.
In recent years, due to positive economic policies of the government, especially relating to privatisation, and significant reduction in interest rates, the stock market in Pakistan has recorded tremendous expansion and growth.
The KSE-100 index, which stood at 2,667 points nearly a year ago, on January 1, 2003, has now crossed 4,800 points, registering a growth of more than 80 percent. Likewise, over the same period, the Market Capitalisation at KSE has improved from Rs 595 billion to Rs 1.27 trillion, a growth of 113 percent, he added.
Although since last market collapse in May 2000, there have been wide fluctuations in the index, yet the bourses have not experienced any defaults, which testifies to the efficacy of the risk management measures enforced by the commission.
There has been a long list of measures introduced by the Securities and Exchange Commission, the most important of which are rationalising of trading system by introduction of 10-day COT in the COT System, development of futures market, finalisation of Rules for margin financing, strengthening of monitoring mechanisms at the stock exchanges, introduction of the Code of Corporate Governance to encourage good governance practices and augment corporate reporting.
While the Commission has successfully implemented the major part of its reform agenda, there is yet another satisfying dimension to this process that the stock exchanges and the brokers community have also responded in a positive manner.
The Securities and Exchange Commission has taken several steps for development and promotion of brokerage service sector and to ensure that interests of all stakeholders are protected.
The registration of brokerage firms has been made mandatory and strict action has been taken against illegal brokers and agents.
Although the stock market in Pakistan has shown an impressive performance in previous years, it has a long way to go in terms of growth and expansion. "As you are aware that in developed countries the Market Capitalisation to GDP ratio ranges from 137 percent in the United Sates to 152 percent in the United Kingdom, whereas in Pakistan it has hovered around only 15 percent in past few years, which indicates the growth potential in the stock market in the country." In this regard, the government is doing its bit by routing the privatisation of major corporations through stock exchanges, like offers for sale made for shareholding in Oil and Gas Development Corporation and Sui Southern Gas Company Limited.
Iqbal Farid said that he intends to make newly launched Investforum a credible on-line investment house with specialisation in stock trading through financial analysis of listed companies and professional advisory services. The real-time stock prices at the exchanges are projected through digital multi-media for the convenience of worthy Investforum clients.
It is because of such interest shown at the policy level and the reforms undertaken by the Regulatory Authority, the SECP, that the capital markets managed to hold the rally that had started about a year ago.
Barring a few interventions, KSE Index of 100 shares continued its journey upwards and touched its highest level of 4941.77 points on February 11, 2004 and on December 1, 2003, the index rose by as much as 195 points which was the highest single-day rise.
The highest ever single-day turnover of over a billion shares was recorded on August 8, 2003, and as such the market capitalisation has now gone up to Rs 1,266 billion. Average daily turnover of the year is 315 million as against 97 million in 2001.