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WEEKLY
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| Regulations for equity market fund issued |
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Friday, July 11, 2008
By Salman Siddiqui
KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has issued tentative regulations for Equity Market Opportunity Fund (EMOF) worth Rs50 billion which will be injected into the fast falling capital market to stabilise it in bad days.
The participants of EMOF have asked for time to understand the details and indicate the amount they may be willing to commit to the Fund. “If an agreement is reached among fund participants and sufficient financial commitments are received from them then the fund is likely to be launched over the next two weeks,” according to a handout released jointly by the SECP and KSE.
Next meeting on the fund formation is scheduled to be held on July 16. The tentative regulations were made public following SECP and KSE meeting held here on Thursday with financial institutions, which are the only eligible investors to pool their funds in EMOF.
National Investment Trust Limited (NITL) will be given the responsibility to run this fund, while financial institutions ie banks and Development Financial Institutions (DFIs), state-owned institutions and semi-government companies would be its only eligible members.
If an agreement is inked between the SECP and the likely members of this fund, then this fund would be invested in the KSE 30-index stocks that are eligible for CFS and CFS MK-II. Fund allocation will be according to the weight of each eligible scrip as a percentage of total CFS value as of July 08, 2008. Listed securities of brokerage houses and their holding companies will not be eligible securities for investment.
The SECP explained that EMOF will not be a fund, but a club of like-minded institutions, willing to provide relief to the market by investing at attractive fundamental valuations.
Where the participants of EMOF would be Financial Institutions (Banks & DFIs), state-owned institutions and semi-government companies having substantially large pension and gratuity funds such as SBP, SLIC, EOBI, PRC, NIC, PIC, CAA, CDA, KPT, PSMC, PSO, SNGPL, WAPDA, retirement funds of OGDC, PPL, SSGC, EOBI, PSO, PIA, NILC, Pak Railways, Banks and DFIs etc.
EMOF shall be managed by NITL. A separate UIN shall be allotted to EMOF and NITL will be given responsibility to open a CDC account for each participant. Shares allocated to each participant will be deposited in this account. The EMOF shall invest the funds during the five days in the following manner:
On day one, the Fund will invest in eligible scrips at the closing values in the Ready Market provided that these values are below 20 per cent of their six-month weighted average prices.
From day 2 onwards, the Fund will invest in scrips at the closing values of the Ready Market provided that these values are below 20 per cent of their six-month weighted average prices; and the scrip closed at the lower circuit breaker on that day.
The EMOF shall be utilised as 30 per cent of funds will be made available on Day one; 30 per cent on day two; 30 per cent on day three and 10 per cent of funds will be made available on Day four. Any unutilized funds shall continue to be made available till the fifth trading day.
After phase one, if funds are still available, the EMOF will review its investment strategy and may reenter the market.
On the other hand, EMOF shall divest its holdings when the share prices of any particular scrip exceed 20 per cent of their weighted average of last six months.
The process of buying shares would be that offers from brokers on behalf of their eligible clients will be submitted to the Exchange in the prescribed format to be notified separately, after the end of the ready market session on each of the five days of phase one.
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ISSN 1563-9479 
