Ex­pand­ing in­vestor base

The Pak Banker - - EDITORIAL -

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.

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