IMF blocks Pakistan stocks bail-out - bourse official
By Sahar Ahmed
KARACHI, Dec 4 (Reuters) - The International Monetary Fund is blocking the Pakistani government's plan to help provide a fund to help distressed investors liquidate holdings in the stock market, a senior exchange official said on Thursday.
'The IMF is not allowing any government guarantee for a fund to bail out the stock market,' said the official, who requested anonymity because the market authorities were still discussing ways to handle the situation.
Authorities in late August imposed a floor on Karachi Stock Exchange benchmark 100-share index after a fall of nearly 35 percent for the year.
Trading dried up as a consequence, and investors were unable to exit the market because they were unable to trade at prices that could attract sellers.
Analysts expect a sharp drop in values once the floor is removed, as shares are trading in off-market transactions at around 30 percent below floor levels, and investors had been hoping the government would provide funds to absorb some of the selling.
In October the stock market regulator had given the go-ahead for a 20 billion rupees ($254 million) fund to be established by four-state run companies by providing 5 billion rupees each, but it has not materialised.
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The government was in negotiations at the time for a $7.6 billion loan to help it avert a balance of payment crisis. The loan was approved at the end of last month and the first tranche has been disbursed.
A letter of intent from the government to the IMF posted on the IMF website indicated that plans to remove the floor were dependent on IMF approval.
'The timing and terms under which the floor on stock prices will be removed, including any use of public funds to support the stock market, will be decided after reaching understandings with Fund staff,' the letter of intent said.
No one could be reached at the IMF to comment on the matter.
Trading on the stock exchange has almost completely dried up, brokers are suffering pay cuts and job losses, and they fear that some could default if the floor is removed without a fund in place.
'The refusal of the stock market fund is a very bad thing,' said Shuja Rizvi, director of broking operations at Capital One Equities Ltd.
The directors of the KSE and the stock market regulator have had several inconclusive meetings to discuss how to move forward, according to sources with knowledge of those discussions.
The KSE-index ended flat at 9,187.10 on Thursday, 43 points above its floors and 500 shares had been traded.
Before it started crashing, the market hit an all time high of 15,739.25 points in April, and had gained more than 10-fold since 2001.
IMF blocks Pakistan stocks bail-out - bourse official - Forbes.com
By Sahar Ahmed
KARACHI, Dec 4 (Reuters) - The International Monetary Fund is blocking the Pakistani government's plan to help provide a fund to help distressed investors liquidate holdings in the stock market, a senior exchange official said on Thursday.
'The IMF is not allowing any government guarantee for a fund to bail out the stock market,' said the official, who requested anonymity because the market authorities were still discussing ways to handle the situation.
Authorities in late August imposed a floor on Karachi Stock Exchange benchmark 100-share index after a fall of nearly 35 percent for the year.
Trading dried up as a consequence, and investors were unable to exit the market because they were unable to trade at prices that could attract sellers.
Analysts expect a sharp drop in values once the floor is removed, as shares are trading in off-market transactions at around 30 percent below floor levels, and investors had been hoping the government would provide funds to absorb some of the selling.
In October the stock market regulator had given the go-ahead for a 20 billion rupees ($254 million) fund to be established by four-state run companies by providing 5 billion rupees each, but it has not materialised.
Comment On This Story
The government was in negotiations at the time for a $7.6 billion loan to help it avert a balance of payment crisis. The loan was approved at the end of last month and the first tranche has been disbursed.
A letter of intent from the government to the IMF posted on the IMF website indicated that plans to remove the floor were dependent on IMF approval.
'The timing and terms under which the floor on stock prices will be removed, including any use of public funds to support the stock market, will be decided after reaching understandings with Fund staff,' the letter of intent said.
No one could be reached at the IMF to comment on the matter.
Trading on the stock exchange has almost completely dried up, brokers are suffering pay cuts and job losses, and they fear that some could default if the floor is removed without a fund in place.
'The refusal of the stock market fund is a very bad thing,' said Shuja Rizvi, director of broking operations at Capital One Equities Ltd.
The directors of the KSE and the stock market regulator have had several inconclusive meetings to discuss how to move forward, according to sources with knowledge of those discussions.
The KSE-index ended flat at 9,187.10 on Thursday, 43 points above its floors and 500 shares had been traded.
Before it started crashing, the market hit an all time high of 15,739.25 points in April, and had gained more than 10-fold since 2001.
IMF blocks Pakistan stocks bail-out - bourse official - Forbes.com
