Quantifying progress
Now that capital market gurus are done patting themselves on the back – for having realised the long dream of a unified stock exchange – it is worth seeing what the exercise is capable of achieving. The main purpose, of course, was to put ownership and operations of capital markets into private hands, improving efficiency while, more importantly in our case, trimming down the leverage large brokers have held over the market for far too long. And while integrating the three exchanges is a necessary step in that direction, it works only when it is treated as one step, which means congratulations should be kept to a minimum till real private ownership is achieved, at least, and powerful brokers are seen restricted in their influence.
The litmus test of every market-related move is the market itself. Interestingly, this was not the only surprise Mr Market had to price in during the week. And it would not be fair to say that the recent arrests of senior management of a very resourceful leading brokerage did not cause any ripples, although the hiccup was not nearly of the magnitude one would associate with such a move in normal circumstances. And since the integration was seemingly originally intended to control influential brokers who could disrupt the market – or threaten to disrupt it – at the slightest hint of transparency, the initial reaction has not been discouraging, to say the least.
A lot more still needs to be done. Transparency is the foremost concern whenever international investors look for markets to park their funds. And capital markets need to be all the more up to scratch in times of political uncertainty, especially the type of troubles Pakistan has with militancy and extremism. Equity market efficiency can still be ensured, provided there is transparency and a well-organised management system. The local bourse has managed to attract outsiders even in times of mayhem. It can naturally do a lot better if its own practices are improved.
