40 Percent Cash Dividend To Shareholders Be Mandatory For Companies: KSE Proposal For Market Solvency
Sunday, September 7, 2008 at 12:06 pm Under Business News 41 views
KARACHI:The Karachi Stock Exchange (KSE) has proposed a mandatory 40 percent cash dividend for shareholders of all listed companies and shares buyback by sponsors of private sector listed blue chips companies as strong supportive measures for the market at this level, it is learnt.
In a letter to the Ministry of Finance, the KSE suggested that 40 percent cash dividend should be mandatory for all listed companies for their shareholders as it was imposed in the year 1999-2000. It has also proposed to the ministry to regularise the equity market opportunity fund to support the market and to request the State Bank of Pakistan to ease liquidity by reducing discount rates, cash reserve requirements (CRR) and SLR requirements.
Sources said that the KSE Board of Directors wants to ensure some supportive measures to mitigate the potential technical risks before removing the floor on stock prices imposed since August 28.
In this regard, the board is considering to convince the sponsors of the private sector blue chips companies to buy back shares of their listed stocks to support the market at this crucial time. According to a director, the step to buy back shares by the private sector blue chip companies will be a strong supportive measure for the market.
It is learnt that the KSE board of directors will meet Federal Finance Minister Naveed Qamar in the next few days. The board will discuss all these issues with the minister before taking any decision regarding floor mechanism.
An informal general meeting of KSE members has also been called on Monday, September 8, to discuss the prevailing market condition. The members will give their recommendations over the issue. The KSE board of directors is also scheduled to meet on Tuesday to take any decision to remove or maintain the floor on stock prices.
The KSE board had set floor on stock prices on August 28, 2008, “as a stabilisation measure to save the investors from further losses, and the floor will enable the investors to settle their dues and avoid default”.
After imposing the floor, dull trading activity has persisted in the share market, as the average daily volumes of ready market declined to 22.776 million shares last week as compared to the previous week’s average of 69.6 million shares and 193 million shares a week earlier.
The board said that the decision to set a floor on stock prices was taken after consultations with all stakeholders to ensure market solvency. The board is not giving a timeframe for the removal of the measure. However efforts are in place to make sure that it is as short as possible.
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