Stock Mar­kets

SECP ‘strug­gling’ to de­mu­tu­alise bourses

Enterprise - - Contents - Courtey: Dawn, Karachi ◆

De­spite the pas­sage of two years, the Se­cu­ri­ties and Ex­change Com­mis­sion of Pak­istan (SECP) has not been able to pur­sue the case of de­mu­tu­al­i­sa­tion of stock ex­changes.

The only progress made so far is that three stock ex­changes of the coun­try are cur­rently un­der dis­cus­sions to find strate­gic in­vestors for the bourses.

So far, only the Karachi Stock Ex­change (KSE) has signed non-dis­clo­sure agree­ments with in­ter­na­tional in­vestors. Mean­while, the La­hore Stock Ex­change (LSE) and Is­lam­abad Stock Ex­change (ISE) have not even en­tered the ad­vanced stage of dis­cus­sions with strate­gic in­vestors.

The SECP seems un­able to have ful­filled its role of keep­ing a check on the de­lays or to ad­dress the griev­ances of stocks ex­changes in this re­gard.

On the other hand, the KSE main­tains that the progress was in ac­cor­dance with the law.

“The time frame ac­cord­ing to the law is within two years of de­mu­tu­al­i­sa­tion,” says She­hzad Cham­dia, head of de­mu­tu­al­i­sa­tion com­mit­tee at KSE.

“The SECP can di­rect stocks ex­changes within two years to en­ter into agree­ment with strate­gic in­vestor - and that has been done by the Com­mis­sion on Au­gust 26, 2014 that is, one day be­fore the ex­piry of two year pe­riod.”

The ISE is still in the pre­lim­i­nary stage of dis­cus­sions with three in­vestors and even the ‘ due dili­gence’ process has not even been worked out.

In­ci­den­tally, the SECP in­stead of is­su­ing any note of con­cern has lauded the ef­forts of the Is­lam­abad Stock Ex­change to get for­eign strate­gic in­vestors and fi­nan­cial in­sti­tu­tions for the sale of its shares.

In a re­cent meet­ing after the ex­piry of two year term, the SECP team led by its act­ing chair­man Tahir Mehmood vis­ited the ISE head of­fice. Mehmood was briefed about the progress so far made by ISE for strate­gic sale to for­eign in­vestors.

The SECP del­e­gates were told that the ISE was at the ad­vanced stage of achiev­ing the goal of di­vest­ment.

On the other hand man­ag­ing di­rec­tor ISE, Mian Ayaz Afzal said that the ISE is still work­ing over the mat­ter of find­ing a strate­gic in­vestor and ac­knowl­edged that the reg­u­la­tor has not is­sued any di­rec­tive or no­tice to the ISE for the de­lay and ex­piry of two years.

How­ever, a se­nior of­fi­cial of the ISE said that the de­lay in find­ing the strate­gic in­vestor was due to the po­lit­i­cal sit­u­a­tion in coun­try.

“The year pe­riod after the ap­proval of de­mu­tu­al­i­sa­tion act in Au­gust 2012 up to the elec­tions in May 2013 went through pa­per works only,” the of­fi­cial added, “Whereas now when the eco­nomic sta­bil­ity was be­gin­ning to be vis­i­ble a new crises has propped up.”

Sim­i­larly, the LSE has too failed to achieve any progress in this re­gard.

The LSE blames the SECP for not ac­knowl­edg­ing the ground re­al­i­ties.

“The cri­te­ria es­tab­lished for the strate­gic in­vestor is too strict and only 28 or 29 par­ties fit into it,” said a mem­ber of the De­mu­tu­al­i­sa­tion Com­mit­tee LSE.

“We have told this re­peat­edly to the SECP that the cri­te­ria needed to be re­laxed so that bourses in Aus­tralia, Malaysia etc could en­ter into agree­ment with any Pak­istani Stock Ex­change – but the Com­mis­sion has yet to re­spond to it,” he added.

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