Daily Times

Karachi: Pakistan first SME Exchange will be operational by the end of current year as relevant preparations are being finalized, says Nadeem Naqvi, Managing Director of Pakistan Stock Exchange PSX. The paid up capital requirement for listing SMEs at the Exchange would be only Rs 25 million as compared to the Rs 200 million required for
listing at PSX.

Talking to Daily Times here on Wednesday, MD PSX said that “block shares” of 100,000 would be offered to “professional investors” rather than ordinary investors in order to minimize risk. “Work on derivative products is also underway. Security Landing and Borrowing, Electronic Traded Fund ETF and two futures products, Single Stock and Index Futures would be launched”, Naqvi said.

Talking about the current market situation, Nadeem Naqvi dispelled the impression that advancement of KSE 100 index to above 40,000 level was a “bubble boom”. “

There is still huge potential because the factors that contribute to the growth of capital market are all positive.

Two major players, oil and gas and banking sectors are under performing their contribution has reduced from 45 percent to 30 percent due to number of reasons including oil price reduction in international market and imposition of super tax and spread contraction in banking sector”, Naqvi observed adding that these sectors’ enhanced contribution will enable capital market to scale new heights.

On the other hand alternatives to the capital market such as real estate and savings are also weakening which presents stock market as the best investment avenue to the investors, both local and foreign. Foreign investment in many sectors as well as expansions, in cement and steel and auto sectors, will also play important role in supporting upward journey, Naqvi said.

China-Pakistan Economic Corridor CPak is also going to play substantial important role in the development not only of Pakistan’s economy but also in the capital market. “In Pakistan’s 70 years history for first time highest
per capita investment will be made”, Nadeem Naqvi added.

In response to a question about Pakistan reentry into MSCI Emerging Market Index, MD PSX pinpointed six factors that played important role to put Pakistan back on the international radar. “Country’s political and social environment, Economic policies (consistent and pro investment), law and order situation, institutions governing capital markets (strong, vibrant, efficient and transparent) and regulators (vision, quality of regulations, inclination to protect interest) and standard of listed companies and their outlook”, he added saying that improvement was observed almost at fronts.

In response to a question about the “market volatility” after inclusion in the MSCI EM Index following inflow of foreign investment, he termed the situation as “double edged sword” because local investors also follow foreign investors and if they start selling the locals would also imitate them. “But we have a circuit breaker mechanism in place which thwarts such situation and other step too have been taken. The capital market is not as risky as it was in 2008”, Naqvi added.

Investor base in Pakistan’s capital market has not increased from 250,000 and if mutual funds are counted the number surges to only half a million. “It is a big challenge and we are creating awareness among masses but brokerage industry should play its role to increase number of investors. Few big players are doing this because it is a capital intensive effort”, he observed.

About international market Nadeem Naqvi said that the global trends in capital markets are generally positive, volatility has increased and money supply has also soared up. The lower and negative interest rates in many countries have made capital market attractive. Investors are opting for future market where risk and return are higher.