Enter the PSX

The benchmark-100 index is almost at the same level it was at the start of 2015, as gains continue to be wiped off amid global economic turmoil and persistent selling by foreign investors. Despite this, most analysts feel that the market has matured and has created its own trajectory. After years of taking cues from foreign investors, the country’s stock exchange has come into its own, signalling the renewed confidence of investors in the economy. In this backdrop, the formation of the Pakistan Stock Exchange (PSX) is a welcome move. There was always little sense in having separate stock exchanges in Islamabad and Lahore when their turnover and market capitalisation was nowhere near the one in Karachi. Integrating the three made sense and will provide a level playing field to brokers and investors from all cities.

This integration also aims at inviting a strategic investor to take up 40 per cent of the stock exchange, while 20 per cent of stakes will be offered to the general public. The remaining ownership would rest with the brokers. The PSX, formerly known as the Karachi Stock Exchange, is a profitable entity, recording earnings of Rs317.4 million in 2014-15. Some foreign stock exchanges have already expressed their desire to invest in the PSX and it all seems to be falling into place for the SECP and the finance ministry. However, there is still much left to do. Broker fraud and outstanding investor claims need to be tackled without alienating stakeholders. Regulations, as strict as some of them may be according to brokers, need to be adhered to. Awareness regarding these needs to be created at a national level since the stock exchange, while having its benefits, also has the reputation of being a monster that can gobble up the ordinary citizen’s savings in a heartbeat. There is a reason why in a country of almost 200 million people, total investor accounts number no more than 0.2 million. While the PML-N will now boast of this historic integration as one of its key achievements, the real test starts now.

Published in The Express Tribune, January 13^th, 2016.

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