PSX MD calls for expanding investor base

Naqvi says multiple reasons behind low number of investors in stock market


Our Correspondent January 15, 2016
PHOTO: AFP

KARACHI:


Pakistan Stock Exchange (PSX) Managing Director Nadeem Naqvi said that expanding the investor base was necessary for the viability of capital markets.


Speaking at a conference on non-bank financial sector and capital markets organised by the Securities and Exchange Commission of Pakistan (SECP) in collaboration with United States Agency for International Development on Friday, Naqvi said the number of stock market investors in Pakistan is low because of multiple reasons, including the low savings rate prevailing in the economy.

Pakistan Stock Exchange launched

Currently, there are around 250,000 investors who directly invest in the stock market, although a majority of them do not trade shares actively. Naqvi also demanded that the government should ensure a level playing field when it comes to different investing avenues.

“Anyone can walk into a National Savings centre to make an investment of Rs5 million in cash merely on the basis of his identity card,” Naqvi said, adding that making a similar investment in the stock market involves tedious paperwork and procedural difficulties.

Noting that the debt market is virtually non-existent in Pakistan, Naqvi said the government should follow Malaysia’s example by asking public-sector enterprises to issue bonds if they need to raise capital. “Infrastructure and energy bonds should be floated to revive the debt market,” he added.

Calling for a massive awareness drive to attract investments in
capital markets, he said the National Stock Exchange of India contacted more than 100,000 people every month ahead of its formal launch.

Accepting that the general public lacks confidence in the stock market, Naqvi said the frontline regulator - the newly named PSX - has been a ‘weak link’ in the aftermath of the closure of the stock exchange for nearly three months in 2008.

Speaking on the occasion, broker Najam Ali said the frontline regulator, the SECP and State Bank of Pakistan (SBP) were responsible for closing the stock market down for months after imposing a price floor. “We have paid dearly for the follies of these institutions,” Ali said.

From $600 million in 2006, the average daily traded value declined to $111 million in 2015, Ali said while emphasising that liquidity has evaporated from the Pakistani share market because of the trust deficit.

MoU for Pakistan Stock Exchange signed

Ali said Pakistan’s possible reclassification by MSCI as an emerging market will bring in fresh foreign investment following June. He added that the number of Pakistani companies fulfilling the criteria for the emerging market space is going to double, as seven to eight companies are expected to post major improvements in the next couple of years.

Published in The Express Tribune, January 16th, 2016.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

COMMENTS

Replying to X

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see our Comments FAQ