The government's major reform measures announced Wednesday would result in stabilization of the capital market in the country. The government unveiled three major measures to support the capital market, ie, Capital Value Tax (CVT) on capital market transactions to be eliminated; easing liquidity of Asset Management Companies - bank borrowing increased from 90 to 360 days, and speculative trading (short selling) restricted in stock market.
Commenting on the capital market related steps, Aftab Ahmad Chaudhry, a veteran of capital market stated that the abolition of the CVT on capital market will be deemed as a positive step because the CVT used to add to the cost of purchase of shares irrespective of whether the investment results in some gain or otherwise.
Furthermore, the extension in the borrowing time for mutual funds would also be good as they would be able to borrow for a year-long period. Regarding short selling reforms, he appreciated the intent of the policy makers to stabilize the market.
However, he said that the market is showing extreme nervousness due to depressed global economic outlook. He said that the government and the SECP need to be appreciated because both are trying their level best to bring stability to the market.
Renowned capital market expert Zahid Latif Khan of Zahid Latif Khan Securities (Pvt) Limited stated that the SECP is taking best possible measures to keep the stock market open and mitigate the risks associated with smooth running of Pakistan Stock Exchange. These measures are taken with the help of the PSX and the NCCPL.
Today's measure taken by Ministry of Finance are not sufficient to arrest the free fall of stock exchange, the Government of Pakistan is the major stake holder in the PSX, so they need to be proactive in supporting it. The government should ask NIT and state life insurance to support the stock market by investing in shares of state own enterprises, Zahid Latif Khan added.