Pakistan Stock Exchange (PSX) may receive new Initial Public Offers (IPOs) of above $1 billion from different power generating and distributing companies under government privatisation process by the end of 2018, said Nadeem Naqvi, Managing Director Pakistan Stock Exchange (PSX).
These initial public officers will give a new boost to our equity market, he said. “It’s a good time for Privatization Commission (PC) to initiate sell-off process of government entities through PSX as the investors’ eyes and trust are on the market now,” Mr Naqvi suggested to the government in an exclusive interview with Pakistan Today. “We are expecting 9-10 new IPOs of national and multi-national companies in 2016-18,” he said.
“The government is going to privatise a number of power supplying companies of Punjab and Sindh and other entities like PARCO, State Life Insurance Company (SLIC) through PSX,” he added. The other energy projects would be set up under China Pakistan Economic Corridor (CPEC) before the end of 2018 and shares of these power units would also be sold through PSX, he claimed.
The best performing market among the world’s Exchanges, the PSX had so far paid returns of over 500 per cent to its investors over a decade, the MD claimed.
The Managing Director said, “general investors of the domestic market do not courage to invest here as PSX is a highly documented sector of the country, while they (people) invest their millions of rupee in National Saving Schemes (NSS) and others products in a simple form. We still have no level playing field because of the interest base system,” he added. The overall growth rates in the capital market are low compared to other regional markets, he said.
The most of the investors’ base in the capital market is linked with brokerage industry and it is the responsibility of brokers to market their products to attract new investors. Now the SECP has got passed a bill from parliament and nobody including the law enforcement agency can interfere in the capital market business without its (SECP) direction, he further informed.
Against an invitation of Expression of Interests (EoIs), the managing director said, PSX has received an overwhelming response from three continents included Europe, Asia and South America as well as local and foreign investors for acquiring its equity stake.
According to him, PSX has received a total of 17 EoIs from foreign and local investors applying under the categories of ‘Strategic Investor’, ‘Anchor Investor’ and ‘Financial Institution’ as a result of the extensive campaign and persistent follow-up.
In the next step, Divestment Committee will assess all the EoIs received and then forward the same with comments to SECP for pre-qualification. SECP, after its own assessment, would declare any or all of the parties submitting EoIs eligible to carry out due diligence of PSX and on its basis submit their binding offers for acquisition of a requisite stake in PSX.
In these EoI, two separate consortiums, one is from East-Asia and another of Europe, have shown their interest in the PSX, Mr Naqvi said. “We need international Exchanges or consortium for the strategic investors, while we do not need any Exchange in Anchor investor,” he added.
Divestment Committee of PSX, constituted by SECP towards the end of February 2016 in pursuance of provisions of Stock Exchanges (Corporatization, Demutualization and Integration) Regulations, 2012, was mandated to oversee and complete the process for divestment of PSX’s 40 per cent equity stake to local and/or international investors. The whole or part of the said stake is proposed to be transferred either to a Strategic Investor or alternatively, a minimum of 25 per cent equity stake may also be sold to a financial investor which opts to act as an Anchor Investor while the remaining part of the stake, if any, would go to other selected financial institutions where a single financial institution is allowed to acquire up to 5 per cent of the stake.
In the meantime, the members of Divestment Committee and management of PSX aggressively pursued prospects in various jurisdictions and in the process, also personally visited some potential investors and investment advisors in China, USA and UK.
He said, “the brokers will take the final decision regarding the selection of strategic partner of PSX as we have to see what new product they will bring for Pakistan’s equity market. We are looking for derivatives products, internet modern techniques and finally we have to see what a new strategic partner can sell our product abroad.”
On the other hand, he said, we have to see what the new strategic partners may give us new internet technology to connect us with international markets through enhanced technology and internet connectivity. We want to connect us (Exchange) with the international Exchanges in future, he said.
The big Exchanges are globally Internet-connected, while many exchanges have been sold only for the modernise equity trade. Recently Hongkong Exchange purchased London Stocks. Thailand Exchanged interconnected with a platform to connect investors from other Asian Markets so that investors can trade in their Exchanges.
He further said that London and Nigeria are in talk to have a cross listing of companies. A new trend has been developed to contact each other exchanges and we do not want to isolate Pakistani market, he added. “We want partners who can build international Exchange connectivity with Pakistan,” he claimed.
Pakistan stocks have been included in the emerging market of Morgan Stanley Capital International (MSCI) and would finally be included in May 2017 as our market is the best performing market in the Asia as well as the world. It has paid returns up to 20 per cent last fiscal year.
He said that the investors from Europe and America are looking for emerging market and after coming into MSCI, world investors will invest in Pakistani stocks.
In the first month of the current fiscal year, Pakistan has received a portfolio investment of $50 million, he said while we are expecting around $300 million through portfolio investment in the current fiscal year.
Because of the economic growth in Pakistan, the domestic companies are also expanding their businesses and factories such as DG Khan, Lucky Cement and others. The foreign investors may also come in local companies as they have no place to earn a good return.
Replying to a question, the head of the PSX said, “it would be very difficult for any country or person to hide the black money in houses and businesses and they have to pay taxes.”
We were in negotiation with Turkey’s stock market for the Cross Listing, but we cannot reach any consensus, he said. It’s a difficult task for us as we do not have a law over the Cross Listing or any formula to pay a dividend to any investor outside the country. We have to make law on both things, he said.
“Actually, we are looking for the investors to increase country’s stocks base and it will possible when foreign investors will come in Pakistani stocks directly or through their brokers or banks,” he added.
Pakistan overall economic and political situation is improved during last three years. Country’s reserves have enhanced to $22-$23 billion only because of our good economic policies. The political and economic direction is on the right track, he claimed. He further said that regulatory framework of the country is transparent, while brokerage regime audit, client assets are good.
Last year, we successfully initiated a trading platform KIT, internet trading system and all 414 brokers are following it. After merging all stock markets into an entity, the listed companies in PSX are getting benefits through saving in different taxes and fees etc.