National interest not capital market top priority

KARACHI - Governor State bank of Pakistan, Dr Shamshad Akhtar Monday declared that her top priority was taking care of the interest of the country and not that of capital market or banks.
She stated this during her visit to KSE where she was invited by the KSE management to address a meeting of the Board of Directors of the KSE, senior stock brokers and heads of commercial, investment banks. This was her first visit to KSE since assumption of office in 2006. The meeting facilitated a constructive dialogue on the current economic situation and the future prospects of the stock market.
The KSE had specially invited the governor to plead their case of setting up of the equity fund that would help stock market to counter current crisis and to request her that any further hike in the discount rates would have negative impact on business activities.
According to inside sources who attended two and half hours long meeting, the governor gave her full attentions to the suggestions put forth by her hosts but in the end she poured cold water on the high expectations of the financial managers when she told them her top priority was to look after the national interest rather than those of the capital market and the banks.
The sources said when the members of the KSE explained their case of setting up the Equity Market Fund and told her that even in developed countries suck funds were created from time to time to haul the market up from the crisis and their central banks participated in such kind of funds, she said she did not know about what centrals banks of other countries do and said there was no clause in SBP rules for participating in such a fund.
A source on the condition of anonymity said that most of the members of the KSE and the financial managers rue over their decision to invite the governor because none of their demands received any sympathetic consideration from the SBP boss.
It is being speculated that SBP may increase discount rates further by 100-150 bps at least in the short term to adjust the exchange rates with depreciating rupee against dollars. And deteriorating economic environment due to twin deficits, both trade & fiscal, coupled with adverse developments occurred at external front over a last two months, SBP would need to continue tight monetary policy further to stabilize national currency as well as curb inflationary pressures in the current fiscal.
 A press note issued by SBP here on Monday said that Dr Shamshad Akhtar said that despite multiple shocks, the country’s economy managed to record economic growth of 5.8%, which is above the average growth trend of 5% observed between FY91 and FY08.
Dr Akhtar said the stock market of the country showed a remarkable performance since 2000 in terms of market capitalization and growth of indices. The KSE registered more than 1000 percent increase in market capitalization and over 900 percent increase in the index since FY00. The index, which stood at 1,520 points, with total market capitalization of Rs. 394 billion ($6.5 billion) in FY00, grew by leaps and bounds in the last few years and reached the level of 15,676.34 points by April 18, FY08, with total market capitalization of Rs. 4,790.98 billion ($75 billion). “This growth surpasses the market performance of major economies in the region, as a result of which KSE-100 index was included in the MSCI Emerging Markets Index from June 2006,” she added.
She said that Pakistan stands out in Asia for allowing foreigners to own 100% of any asset in any sector, and are not subjected to any ownership limits or discriminatory taxes on dividends in the secondary market. At current valuations, the stock market offers an attractive option to investors, both domestic and foreign.