KSE members selling out membership cards at throwaway price

Whereas the country’s volumes-starved capital market is under immense pressure on the external and domestic fronts, many of the members of Karachi Stock Exchange (KSE) are tending to shut their loss-making stock market business. The market participants, particularly the 200 card holders, are losing interest in the capital market, where, due to low volumes, the profits are less attractive. This situation has forced many of the active KSE members into selling their membership cards even at throwaway prices.
M/s Hum Securities is one such card holder which, the market sources said, has finalised a deal with an unknown buyer to sell its membership card at Rs40 million. “The deal has been made to sell the membership card at four crore rupees,” said a source privy to the deal.
This price reflects a tremendous devaluation of the assets related to the stock market as the same card used to be priced at Rs140 million some three years back in 2008.
“This rate shows that the membership cards have shed its price value by over 70 per cent or Rs100 million over the past few years,” the source said. Abba Karim, the source recalled, was the card holder who had sold his membership card at Rs140 million in 2008.
Commenting on the deal, a market observer said the volumes, which were staggering at record low of 30 million shares, had left market participants with no option but to quit. He said while the investors were keeping aloof from the equity market due to an ill-thought-out regulatory framework, the controversial taxes like the Capital Gains Tax (CGT) had added fuel to the fire.
Securities and Exchange Commission of Pakistan has finally realised that CGT was not in the interest of the country’s ailing economy.
“Maintaining status quo on the CGT is not in the interest of the economy as it has adversely impacted tax revenue collection as well as trading volumes at capital markets,” SECP chairman Muhammad Ali observed in a notice sent to KSE last Friday. The levy, the regulator conceded, had adversely affected investors’ sentiments, capital formation and overall functions of the capital market. Uncertainties on the political front are equally attributable as causes of eroding volumes at the stock markets.
“Stock market investors will keenly follow developments on the political front,” said Muhammad Sohail, a stock market analyst and chief executive of Topline Securities. The analyst said market would rally if independent caretaker government was appointed with consensus to supervise the elections in 2012.
A market participant claimed that there were many among the 160 active KSE members who were bracing themselves for selling out their membership cards, but some regulatory requirements were hindering their way. As per SECP rules, he said a member wanting to sell his/her card would need to get SECP’s clearance apropos his last three years’ income tax statements besides that of his clients.