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Merger of stock exchange companies into a single entity — the move likely to broaden investment base in Pakistan

Published on 25th Jan, Edition 04- 2016

 

The government has integrated Karachi Stock Exchange (KSE), Lahore Stock Exchange (LSE) Islamabad Stock Exchange (ISE) to form national stock exchange to be called as Pakistan Stock Exchange (PSE) with a view to improve the capital market outlook for attracting the foreign direct investment and for the economic prosperity of the country.
Under the demutualization program of the stock exchange, there is a possibility of direct foreign investment by a strategic buy of 40 percent shares of the Karachi Stock Exchange, which would certainly help broaden the investment base as well as exposure of Pakistan Stock Exchange to the investors from rest of the world.
The offer from KPK Chief Minister for setting up a branch of Pakistan Stock Exchange in his province as the first positive feed back within the country and there are strong indicators that investors from other provinces like Balochistan and KPK, so far not engaged in investment in the capital market, would help capitalization in Pakistan Stock Exchange.
Commenting on the development, Minister for Finance, Senator Muhammad Ishaq Dar said that the government was working hard to achieve this historic goal for creating a strong, vibrant and competitive financial and capital market for building a strong economy in order to further strengthen the national economy.
Ishaq Dar termed the scheme of integration a win-win situation for all the stakeholders and a landmark achievement, which would go a long way towards sustainable development of capital market of the country. He also appreciated Securities and Exchange Commission of Pakistan (SECP) and assured full support of the government to achieve divestment of shares of public sector enterprises to get the full benefits of the exercise.
The government, he said was determined to promote standards and quality for the corporate sector and capital market in collaboration with SECP adding that government was also working to implement a robust reforms agenda with focus on strengthening good governance practices.
Ishaq Dar also lauded SECP for getting Pakistan’s index reclassified in upcoming annual market classification review of MSCI and pushed the SECP for reclassification of Pakistan’s capital market as MSCI emerging market.
The minister also reaffirmed the government’s resolve to build forex reserves by US$21 billion by the end of current calendar year besides narrowing the gap between income and expenditure of the government.
Ishaq Dar said that fight against terrorism and extremism was heading towards success and expressed the hope that soon country would become a peaceful and prosperous country.
The Finance Minister said that after achieving the macroeconomic stability, the government was focusing on growth and set a target to get 7 percent GDP growth rate during next two years. For achieving higher growth rate, the government has initiated work on the development of mega energy generation projects to generate about 24,000MW electricity. He said that about 10,000MW electricity would be added in national grid by the end of December 2017, which would help in GDP growth and economic uplift of the country.
He called for avoiding the speculations and panic as it was a routine exercise in capital market and would soon be settled.

 

SECP

Speaking on the occasion, Chairman SECP, Zafar Hijazi said that SECP has achieved successes including demutualization and legislation and played a key role to make the capital market of the country as hub of foreign investment.
He informed that the integration process was not a new as many developed economies like Hong Kong, Singapore and Malaysia have one capital market and recently India has also merged its 23 stock exchanges into single stock exchange.
Brokerage houses
Although the majority of the brokerage houses expressed their confidence that the move of integration would help strengthening the capital market in Pakistan, however, some of them have reservations especially on what they call overregulation of the stock market, which causes concern among the investors. However, the integration of stock markets would help the regulators to implement the rules and regulation across the board without any confusion.
One of the leading broker while commenting on the stock market said that Pakistan oil and energy based stocks have a great strength to take the market to a greater height, however, it is unfortunate that the energy sector suffers from lack of direction and coordination as most of them have their own policies as they are not working on same page.
Many brokerage houses strongly recommended a specialized ministry to look after energy sector instead of distributing this most important sector into different ministries and regulatory bodies like OGRA-NEPRA, they need to be merged into a single entity to run the energy sector in a single direction.
There are big state-owned oil and gas companies like PPL, OGDCL, PSO, SSGC and SNGP besides power generating and distributing companies but all of them are being run by different board of directors comprised of government functionaries rather than technical experts, chartered accountants and prominent business leaders from the private sector.
The energy sector in Pakistan need to be reformed with a view to take full advantage of the available energy resources in the country, they recommended.

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