Pakistan equities surge after new rules
Thursday, 26 June 2008
Andrew Wood, FT Syndication Service
HONG KONG: Shares in Pakistan surged by the most in six years last Tuesday as the Karachi Stock Exchange banned short selling for a month, tightened the limits on how far shares can fall in a session and announced a Rp30bn stabilisation fund to try to stop prices from sliding.
The benchmark KSE 100 Index closed 8.6 per cent higher at 12,122.67, more than reversing a 4.2 per cent drop last Monday when investors were fretting about political instability, inflation and widening budget and current account deficits.
Pakistan was one of the best performing stock markets in Asia last year. It rose 40 per cent despite mounting social and political problems that culminated in the assassination of Benazhir Bhutto in December. It was becoming a favourite of "frontier" market investors looking for big returns in less-developed markets as many emerging markets show signs of maturity and growing correlation with developed exchanges.
But the KSE 100 fell as much as 29 per cent from April's 15,676 peak and last Monday hit a 15-month low. Last month the State Bank of Pakistan, the central bank, spooked investors by raising interest rates by 1.5 percentage points to 12 per cent in a bid to slow accelerating prices.
Regulators and stock exchange managers met last Monday night to find ways to stabilise the market in the light of a "continuous declining trend" that might create "systemic risk", according to a statement issued by the Karachi Stock Exchange.
Another FT Syndication Service report by Michiyo Nakamoto from Tokyo adds: As the season for shareholder meetings in Japan comes to a peak this Friday, with 869 listed companies staging their annual shareholders' meetings on that day alone, the outcome of a few such events will have a significant impact on global investor sentiment towards Japan.
All eyes will be on J-Power, the electricity wholesaler, which faces five shareholder proposals from The Children's Investment Fund, the UK activist investor that is its largest shareholder with a 9.9 per cent stake.
TCI, which has been involved in an increasingly acrimonious battle with J-Power to improve corporate performance, is pushing for the Japanese utility to increase its dividend, appoint three outside directors and issue Y70bn ($652m) in share buybacks.
This is the second year that TCI has challenged J-Power's management at the company's AGM. Last year, TCI's proposal for a dividend of Y100, or triple the company's offer, failed but it did win more than 30 per cent of the vote. Observers say the outcome of this meeting is likely to affect not just TCI's position in Japan but foreign investor sentiment overall.
Investors are watching closely for any sign that shareholder activism can succeed in Japan, following the disheartening result of last year's AGMs.
Southeastern Asset Management, the US investment company, for example, is looking to oust the chief executive of NipponKoa, a leading non-life insurer.
Southeastern, which is a decade-long investor in NipponKoa, said recently that it had lost confidence in Makoto Hyodo, the Japanese company's chief executive. The US investor said Mr Hyodo had presided "over a period of rapid destruction of value".
Brandes, a long-term value investor, is calling on Hibiya Engineering to carry out a dividend rise and share buyback. The obstacles to the success of these shareholder proposals remain formidable. Japanese institutional investors tend not to vote against company management while foreign investors have limited time to send in their proxies.
At the same time, Japanese companies have also increased cross shareholdings with friendly business partners. However, there are growing signs that - whatever the outcome of these particular AGMs - shareholder pressure is already producing some positive results.
For one thing, the number of shareholder proposals has dropped from about 30 last year to just nine this year, according to Nomura Securities.
HONG KONG: Shares in Pakistan surged by the most in six years last Tuesday as the Karachi Stock Exchange banned short selling for a month, tightened the limits on how far shares can fall in a session and announced a Rp30bn stabilisation fund to try to stop prices from sliding.
The benchmark KSE 100 Index closed 8.6 per cent higher at 12,122.67, more than reversing a 4.2 per cent drop last Monday when investors were fretting about political instability, inflation and widening budget and current account deficits.
Pakistan was one of the best performing stock markets in Asia last year. It rose 40 per cent despite mounting social and political problems that culminated in the assassination of Benazhir Bhutto in December. It was becoming a favourite of "frontier" market investors looking for big returns in less-developed markets as many emerging markets show signs of maturity and growing correlation with developed exchanges.
But the KSE 100 fell as much as 29 per cent from April's 15,676 peak and last Monday hit a 15-month low. Last month the State Bank of Pakistan, the central bank, spooked investors by raising interest rates by 1.5 percentage points to 12 per cent in a bid to slow accelerating prices.
Regulators and stock exchange managers met last Monday night to find ways to stabilise the market in the light of a "continuous declining trend" that might create "systemic risk", according to a statement issued by the Karachi Stock Exchange.
Another FT Syndication Service report by Michiyo Nakamoto from Tokyo adds: As the season for shareholder meetings in Japan comes to a peak this Friday, with 869 listed companies staging their annual shareholders' meetings on that day alone, the outcome of a few such events will have a significant impact on global investor sentiment towards Japan.
All eyes will be on J-Power, the electricity wholesaler, which faces five shareholder proposals from The Children's Investment Fund, the UK activist investor that is its largest shareholder with a 9.9 per cent stake.
TCI, which has been involved in an increasingly acrimonious battle with J-Power to improve corporate performance, is pushing for the Japanese utility to increase its dividend, appoint three outside directors and issue Y70bn ($652m) in share buybacks.
This is the second year that TCI has challenged J-Power's management at the company's AGM. Last year, TCI's proposal for a dividend of Y100, or triple the company's offer, failed but it did win more than 30 per cent of the vote. Observers say the outcome of this meeting is likely to affect not just TCI's position in Japan but foreign investor sentiment overall.
Investors are watching closely for any sign that shareholder activism can succeed in Japan, following the disheartening result of last year's AGMs.
Southeastern Asset Management, the US investment company, for example, is looking to oust the chief executive of NipponKoa, a leading non-life insurer.
Southeastern, which is a decade-long investor in NipponKoa, said recently that it had lost confidence in Makoto Hyodo, the Japanese company's chief executive. The US investor said Mr Hyodo had presided "over a period of rapid destruction of value".
Brandes, a long-term value investor, is calling on Hibiya Engineering to carry out a dividend rise and share buyback. The obstacles to the success of these shareholder proposals remain formidable. Japanese institutional investors tend not to vote against company management while foreign investors have limited time to send in their proxies.
At the same time, Japanese companies have also increased cross shareholdings with friendly business partners. However, there are growing signs that - whatever the outcome of these particular AGMs - shareholder pressure is already producing some positive results.
For one thing, the number of shareholder proposals has dropped from about 30 last year to just nine this year, according to Nomura Securities.