The government is expecting around $2 billion portfolio investment as a result of strict regulatory framework, recently introduced to enhance investors’ confidence and foster growth of a robust corporate culture.

“There has been $300-350 million outflow of investment from the stock market since January this year but now we hope to shortly have a couple of billion dollars new portfolio investment”, says SECP chairman Mr Razi-ur-Rahman Khan.

The SECP chairman recently met ten fund managers abroad who assured him of sizable portfolio investment following various reforms undertaken by the SECP”, he told Dawn.

He said he has also received “positive indications” from many Middle Eastern investors who have surplus funds and were interested to invest in Pakistani bourses. Similarly, he said that a number of investors from the North America were approaching SECP to invest in Islamic financing.

One of the important step taken by the SECP was to ensure stabilisation of stock markets by finalising Rs20 billion Market Opportunity Fund--- just launched by the National Investment Trust (NIT).

Initially, Rs50 billion fund was proposed but eventually its size was reduced to Rs20 billion with a view to first achieve some degree of stability. Mr Khan said it was not designed to boost the market but to remove manipulation by encouraging the institutional investors specially banks and financial institutions to go for more buying and selling.

“And now the bigger brokers have understood very well that it would not be easy to manipulate the market and make windfall gains”, he said.

An agreement has been reached on all the modalities of the fund among the SECP, Karachi Stock Exchange (KSE) and the financial institutions. Firm commitments have been obtained from the financial institutions to participate in the new fund.

He claimed that an in-house system has been developed to effectively monitor the stock market. “SECP has identified those who are working and investing in the stock market since 2006 and the list includes the sensitive information which will help us to restrict manipulation”, Mr Khan said.

He did not believe that SECP would violate any code of conduct or ethic by having the precise information about the small and bigger market players. Far-reaching reforms have been introduced to ensure transparency in the stock market. However, political and economic events and the issues concerning inflation and fiscal deficit would continue to impact the market.

Khan said “in next four months the stock exchanges will be demutualised”. The SECP in consultation with the stock exchanges has developed the draft stock exchanges (corporation, demutalisation and integrated) ordinance 2007 which has been approved by the cabinet and will be promulgated once the president has approved it.

“This step will certainly remove the control of the brokers on stock markets”, Mr Khan said adding that the ordinance will curtail the limit and the strength of brokers at 40 per cent while 60 per cent directors will have to be taken from outside and then there will be no pressure by the management.

The SECP chairman said that pension funds would be invested in stock market for which the newly appointed Economic Advisory Council is preparing recommendations.

Last month SECP gave licences to four asset management companies to act as Pension Fund Managers and seven pension funds have been authorised.

Out of these seven, four are Islamic and three are conventional pension funds. Individuals contributing to the pension fund have the flexibility to choose between various investment options as well as between various fund managers.

Mr Khan said he does not know whether one dozen brokers sitting in Karachi and two dozens in Lahore were manipulating the market with the alleged support of some government functionaries.

“One needs to have some proof to take any action against anyone who has done some wrong with the connivance of any government servant”, he said.

However, he said with the launching of e-services by August 14, greater transparency and prudent practices in the capital market could be ensured. The SECP is setting up of Pakistan Institute of Capital Markets (PICM) which will conduct various examinations leading to certification for different segments of the capital market. Chartered Financial Analysts Association of Pakistan (CFAAP) has been engaged to develop an analyst association certification programme as a first step in this direction.

SECP is also in the process of developing a code of conduct for analysts, asset managers and brokerage houses in consultations with CFAAP. These codes are aimed at developing an ethical conduct outline for the relevant market professionals based on their ability to influence the decision making of an investor.