Pakistan plans to unfreeze stock market by Oct 27October 11th, 2008 - 12:16 am ICT by IANS
Karachi, Oct 10 (DPA) Pakistan’s main Karachi bourse Friday reluctantly decided to unfreeze itself by Oct 27 only if the government fixes a cap on interest rates on loans taken by top brokers, sources said.”The decision to unfreeze is only tentative. We are watching the government to see if it will inject money into the market and put a cap on interest rates,” Akeel Karim Dhedhi, chairman of local giant AKD Securities told DPA.
The Pakistani stock market, roiled by domestic political instability and economic turmoil, has been virtually closed for the last two months after losing almost 50 percent in value since May.
Among the major reasons for the decline is a bleak investment scenario due to growing Islamic insurgency in North West Frontier Province (NWFP), a spate of suicide bombings across the country, and mounting tensions between NATO forces and the Afghan government.
Meanwhile, the recent credit crunch has caused the interest rates on short-term loans to shoot up to an all time high of 60 percent.
Dhedhi said the directors of Karachi Stock Exchange in a meeting with the state watchdog, the Securities Exchange Commission of Pakistan (SECP), had demanded a cap on interest rates at 24 percent.
Dhedhi said the meeting was still going on and no decision was taken so far whether the SECP would convince the financial institutions to lower the interest rates for brokers.
Some brokers have borrowed billions of Pakistani rupees ($1 equals to 80 rupees) from banks to buy shares.
“Many top guns of the market are at the verge of bankruptcy,” said Mudassar Malik director at the BMA Capital Management.
Though the central State Bank of Pakistan has pumped more than 20 billion rupees ($240 million) in the money market this week the interest rates kept climbing.
Pakistan is currently facing inflation of more than 25 percent and a widening current-account deficit of over $14 billion.
The country’s currency has depreciated by 22 percent since January.
Tags: akd securities, credit crunch, current account deficit, islamic insurgency, north west frontier, pakistani rupees, securities exchange commission, short term loans, state bank of pakistan, state watchdog