PSX gets a new lease of life.

Byline: Dilawar Hussain

The government broke its silence on the fate of the stock market on Friday as the finance adviiser to the prime miniister sprang into action an hour after the close of the market, which had witnessed bloodbath that day.

Dr Abdul Hafeez Shaikh met a delegation of stockbrokers, led by PSX Chaiirman Sulaiman Mehdi, and gave a patient hearing to their woes. From the peak of 53,124 points on May 25, 2017, the KSE-100 index tanked 20,029 points or 38 per cent to the three-year low of 33,166 points on Friday. Individual stocks from both blue-chip and second-tier categories lost 50-80pc of their value. Since the 1994-96 slump, the market has not fallen for three years in a row.

The music to the investors' ears was the Finance Minister's consent on Friday to consider the recommendation of creating a market support fund (to bail out) the market. Mr. Sulaiman Mehdi confirmed to this writer that 'no amount regarding the size of support fund had been decided and rumours specifying it, were baseless'.

In all the twisting of rules, small investors with the capacity to trade in the ready market only are clearly at a loss

He went on to say: 'We forwarded a proposal for a market support fund and told the Finance Minister that a success story already existed of a support fund and he agreed'. The last market support fund was set up during the market meltdown of 2008 to arrest the free fall in stock prices, which had plunged by almost 55 per cent in four months.

A government-guaranteed Stock Market Support Fund of Rs20 billion was set up under the management of NIT on Jan 13, 2008. It invested in the shares of eight government-owned enterprises listed on the stock market: OGDC, PSO, PPL, Sui Southern, Sui Northern, PTCL, National Bank and Kapco. The move, which at the time was presided over by the then chairman NIT Tariq Iqbal Khan, provided the sinking market with stability. National Bank had contributed Rs7bn, EOBI Rs5bn and State Life Rs2.5bn.

After the conclusion of the meeting, Finance Minister along with the brokers delegation also met Governor State Bank of Pakistan Dr. Reza Baqir, ostensibly to discuss the modalities of the support fund.

Although it would take a while to persuade all the participants of the fund to extend their cooperation, the news may give new lease on life to the market. Professor Khalid Mirza, chairman of the Policy Board of the Securities and Exchange Commission of Pakistan told this writer on Friday evening...

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