KARACHI: When Elixir Securities CEO Junaid Iqbal asked the roughly 200 participants of the Accountants for Business Global Forum as to how many of them invested in the stock market, less than a fifth of them responded in the affirmative. This was despite the fact that a majority of the participants were accounting professionals belonging to the Association of Chartered Certified Accountants (ACCA), the organiser of the event.
Another question by Iqbal, who was moderating a panel discussion on the rise of capital markets, revealed that an equally abysmal number of participants knew that salaried people could get handsome tax breaks if they invested in mutual funds instead of keeping their savings in bank accounts.
“The broker, who is at the frontend, must be educated if we want to increase the number of investors in the stock market,” said Karachi Stock Exchange (KSE) Deputy Managing Director Haroon Askari, while taking part in the panel discussion.
Institute of Capital Markets CEO Javed Hassan said the best way to attract people to capital markets is to popularise mutual funds. “These are risk-free funds and offer substantially higher returns than a typical savings account,” he said. He noted that once people realised they could beat inflation by keeping savings in mutual funds, their transition to high-risk and high-return equity funds would become relatively quicker.
While a few participants said companies needed incentives such as lower tax rates to get listed on the stock market, others opposed the suggestion, citing the example of a large number of textile mills which became listed some years ago only because it lowered their corporate tax rate by 10%. “Their status as a listed company has added little value to the capital market,” one speaker noted.
The forum participants also received the ACCA’s new series of publications on capital markets. “Dominant family firms and formerly state-owned organisations are the norm, not the exception, in emerging capital markets,” said one ACCA report, adding that governance arrangements could not simply be borrowed from practices in more established markets.
The report also highlighted the fact that markets failed because of lack of liquidity, but became unstable when liquidity outgrew their institutional frameworks.
Published in The Express Tribune, November 22nd, 2012.
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ