Islamabad:The Pakistan Economy Watch (PEW) on Monday asked the government to take steps aimed at restoring confidence of the small investors in the stock market to boost economy.
Companies are left with no option but to go for costly borrowing from the banks as the cheap option of IPO (Initial Public Offering) has become futile due to suspicions among the retail investors, it said.Lower investors’ appetite has been forcing many firms to shelve their IPO plans despite getting approval which is sending negative signals, said Dr. Murtaza Mughal, President PEW.
Only four companies opted for IPOs during the outgoing fiscal while rest borrowed from banks which increased their cost of doing business, he added.He said that during 1991 and 1992 Pakistan witnessed 150 IPOs which were more than all IPOs put together in the history of country; while in 2010-11 we had only two.
On the other hand, in India, seven firms raised Rs 12.64 billion via IPOs during the six months to June 2012. In the first half of 2011, twenty two Indian companies raised Rs 33.92 billion.Dr. Murtaza Mughal said that reason behind dull IPO market in Pakistan is that the small investors faced five crashes from 2000 to 2008. So far, no culprit has been identified or held responsible which has shattered confidence of investors beyond repair.
The plunderers have been enjoying a free ride since then which is the reason companies are failing to attract public, he added. He said that former Prime Minister Shaukat Aziz has the credit of having record number of crashes during his era while his policies left stock mafia brave and markets unprotected.
No wonder why only one per cent companies are listed in Pakistan; we have some 120,000 active investors while 21 million Indians and almost half of the American population trust their stock markets.Only way to boost dry IPO market is to restore investors’ confidence by penalising the stock mafia and returning looted wealth to the victims otherwise investment and development in Pakistan will remain a far cry, warned Dr. Mughal.