Pro­mot­ing Pak­istan’s Eq­uity Mar­ket

Enterprise - - CONTENTS - By Zo­haib Feroz Khan

With the global eco­nomic down­turn, in­vest­ment op­por­tu­ni­ties seem to have dried up for in­vestors around the globe. The re­ces­sion has spelt doom for not only small in­vestors but large fi­nan­cial in­sti­tutes have taken a hit as well. In the midst of this sit­u­a­tion, Pak­istan’s eq­uity mar­ket rep­re­sents a won­der­ful op­por­tu­nity for for­eign in­vestors as it of­fers rel­a­tively bet­ter ben­e­fits.

The Karachi Stock Ex­change has risen over 65% ever since the be­gin­ning of 2012 and has been one of the best per­form­ing mar­kets in Asia; sur­pass­ing global stock mar­kets, in­clud­ing In­dia, China, Hong Kong, Tokyo, New York and Lon­don. Mar­ket seg­ments that have showed out­stand­ing per­for­mance in­clude en­ergy, food, tex­tiles, spin­ning and ce­ment. The ex­tent of this tremen­dous growth can be

“Dur­ing the pe­riod from Jan­uary 24, 2013 to May 22, 2013, the KSE 100 in­dex wit­nessed a rise of 4,550 points (27 per­cent). Dur­ing this pe­riod the net for­eign in­vest­ment in the cap­i­tal mar­kets was $276 mil­lion. This shows that our mar­kets carry sig­nif­i­cant at­trac­tion for for­eign in­vestors and carry a po­ten­tial for long term growth. The mar­ket fun­da­men­tals such as price earn­ings ra­tios of our mar­ket are also lu­cra­tive as com­pared to peer ju­ris­dic­tions thereby pre­sent­ing an op­por­tu­nity for prof­itable in­vest­ments and healthy re­turns”

–Tahir Mah­mood, Act­ing Chair­man, SECP

seen in the ta­ble here. The rea­sons for this growth have been a num­ber of con­ducive mea­sures by the govern­ment which have helped in build­ing in­vestor con­fi­dence and in­creased the po­ten­tial of earn­ings. Cap­i­tal gains tax along with the de­mu­tu­al­iza­tion of the stock ex­change have been key en­ablers in in­sti­gat­ing this rapid surge. Ad­di­tion­ally, the cut in dis­count rate by the State Bank of Pak­istan and a smooth trans­fer of power from one demo­crat­i­cally elected govern­ment to an­other has also played a part in at­tract­ing in­vestors to in­vest with con­fi­dence.

To ap­prise US in­vestors of the po­ten­tial of Pak­istan’s eq­uity mar­ket and ad­dress their fears over its volatil­ity, the Fifth An­nual Pak­istan In­vest­ment Con­fer­ence was co- cu­rated by the Karachi Stock Ex­change in part­ner­ship with Bloomberg LP and JS Bank in Omni Berk­shire Place, New York. It was jointly spon­sored by the Pak­istani bro­ker­age house, First Cap­i­tal Eq­ui­ties and Auer­bach Grayson of USA. The con­fer­ence was at­tended by high net- worth in­di­vid­u­als and man­agers of lead­ing in­ter­na­tional in­vest­ment funds in the US who were keen to ex­plore the emerg­ing mar­ket po­ten­tial and wanted to un­der­stand its dy­nam­ics.

The COO of First Cap­i­tal Eq­ui­ties Limited, Fa­rooq Habib said: “In my opin­ion, the Pak­istan eq­uity mar­ket is one amongst very few mar­kets around the world that is poised to ad­vance on a long- term bull phase over the next sev­eral years.”

Eight ma­jor Pak­istani com­pa­nies, in­clud­ing DG Khan Ce­ment, En­gro Cor­po­ra­tion, En­gro Foods, Fa­tima Fer­til­izer, MCB Bank, Nishat Mills, OGDC and PPL at­tended the two­day con­fer­ence and had one- on- one in­ter­ac­tions with over 50 prospec­tive se­cu­rity in­vest­ment in­sti­tu­tions.

The KSE chair­man, Muneer Kamal ex­pressed his sat­is­fac­tion on the ex­tra­or­di­nary per­for­mance of the Pak­istani eq­uity mar­ket in dif­fi­cult global eco­nomic cir­cum­stances. He was con­fi­dent that strong mar­ket fun­da­men­tals are driv­ing the growth in the eq­uity mar­ket and keen for­eign in­vestor in­ter­est is a clear sign that con­fi­dence in the coun­try’s cap­i­tal mar­ket has been re­vived.

On the other hand , KSE MD, Nadeem Naqvi spoke of the un­der­ly­ing driv­ers that have re­sulted in the strong per­for­mance of the eq­uity mar­ket. He elab­o­rated on the cap­i­tal mar­ket reg­u­la­tory regime, both at the SECP as well as the ex­changes level, and un­der­lined the fo­cus on sys­tem­atic risk man­age­ment, post- de­mu­tu­al­iza­tion and sep­a­ra­tion of reg­u­la­tory and com­mer­cial func­tions of the ex­changes to avoid con­flict of in­ter­est and em­pow­er­ment of in­vestors to pro­tect their in­ter­ests. He went on to ap­plaud the ef­forts of the stock ex­changes to en­cour­age greater par­tic­i­pa­tion in the eq­uity mar­ket. Mr. Naqvi pointed out that Pak­istan’s ef­fec­tive GDP was not $ 228 bil­lion but close to $ 330 bil­lion if the huge un­doc­u­mented econ­omy were taken into ac­count. He ex­pected the GDP to fur­ther rise to­wards $ 450 bil­lion over the next three years. Mr. Naqvi also brought to light the in­her­ent re­sources that lie in Pak­istan, rang­ing from agri­cul­ture to min­er­als to strong tra­di­tional in­dus­tries.

The con­fer­ence also pre­sented top Pak­istani com­pa­nies in ma­jor sec­tors such as bank­ing, chem­i­cals,

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