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State-run companies allowed to invest funds in stocks

KARACHI (March 04 2003) : Pakistan has allowed the state-run companies to utilise their funds to invest in capital markets, a move to boost the confidence of investors.

“In distant future, we will see funds flowing from state-run companies like Employees Old Age Benefit Fund, Pakistan International Airlines, Water and Power Development Authority and Pakistan Steel Mills into the stock markets,” Nasim Beg, chief executive of Arif Habib Investments, managing two open-ended mutual funds and one closed-end fund worth over Rs 2 billion, told reporters in Karachi.

The state-run companies have been allowed to buy shares of banks listed at the Karachi Stock Exchange, “though they have not yet received regulatory framework from the Securities and Exchange Commission of Pakistan (SECP), the stock market regulator, to invest in the stock markets”.

They have as much as Rs 100 billion of funds at present invested in banks, Beg said.

“Down the road, we see flow of funds from this sector, as interest rates are declining and national saving plans will see more cut in future,” Beg said.

Rates on national saving plans are linked with Pakistan Investment Bonds whose yields is just a little over five percent.

“Our Pakistan Investment Fund and Pakistan Stock Fund over the years has grown four-fold to Rs 1.15 billion and Rs 435 million respectively,” Beg said.

The stock market since January 16 2003, is down by 18 percent on concerns of possible US attack on Iraq and local law and order situation.

“At present, the stock market is at 6 multiples and could grow to 10 multiples on back of good corporate results and attractive dividend yields, which means the index can go up to 4500 points mark over the next two years.

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