Expanding investor base
ACCORDING to a report, Pakistan Stock Exchange (PSX) expects to add 600,000 new investors to its investor base, raising the total to one million in the next two years. To this end, capital market hubs will be established across the country to increase the number of investors. The first hub has already been established in Abbottabad and the second will be set up in Peshawar. In all, about 10 to 12 capital market hubs will be established in other cities in the next two years. Representatives of all the stock exchanges will be available for the investors' guidance. The PSX has also planned to set up small and medium enterprises counter at the stock exchange to facilitate the businesses. In going about the task, the existing regulatory environment and demutualisation will prove of great help.
Pakistan's per capita income is rising and there is a big potential for mopping up savings in the country. One reason why the country's stock exchanges have not been able to attract a larger stock of investors is the history of sudden, unexpected fluctuations in the market. We have seen wild swings in the last few years. It is relevant to mention here that after a difficult few weeks in the beginning of the current year, stocks have rebounded. At the beginning of the week, the KSE-100 index gained 227.24 points (0.70pc) to close at 32,706.22. The sentiment was bullish and the index took a big leap forward by 369 points. Banks have been at the centre of the recent rally. Since January 19, the index has gained 2,078 points mainly on the back of HBL (216 points), MCB (106 points), UBL (96 points) together with PPL (153 points) and OGDC (150 points).
The turnaround at the stock exchange is a welcome development given the volatile market conditions of late. Negativity has gripped global exchanges for the last few months with many equities and indexes sinking in the red last year. PSX finished flat in 2015, coming down considerably from its August peak. In January, the benchmark index shed another five percent amid downward volatility. The start of the year witnessed considerable downside as the market dropped below 30,000-mark for the first time since March 2015. In January, the market lost over 1,500 points (or 4.6 percent) making it the worst start in seven years. Volatility in oil prices and continued concerns over Chinese economic health caused foreign selling to continue at PSX.
It may be recalled here that around the same time last year, the market was bullish. Following a three-year run of average 41 percent return, the bourse was expected to rise further. It was smooth sailing till the index broke 36,000-mark in August. That, however, was hindered by turbulence in global equities and marked the beginning of a difficult period for the bourse that is yet to end. Foreign investors started withdrawing their portfolios. Despite what happened in the latter half of 2015, brokerages remain bullish on the markets outlook this year. They are expecting KSE100 index to close the calendar year at around 38,500 points. Some of the key factors this year are the same as the year before - declining interest rates, low CPI growth and commodity price slump. The major developments that are projected to matter during CY16 include CPEC and Pakistan's potential re-entry into the MSCI Emerging Market index, which is expected to attract sizeable foreign portfolio investment. This is thus the right time for PSX to launch its initiative to attract new investors.