PSX to open bids invited for stake sale next week

Former board member believes process may fetch between $76m and $107m

KARACHI: The Pakistan Stock Exchange (PSX) is scheduled to open on Wednesday the bids submitted in response to its offer of 40% stake to strategic partner(s) as part of the ongoing demutualisation process of the equity market, an official told The Express Tribune on Friday.

“The deadline for the divestment of PSX stake is December 27. However, the exchange has decided to open bids on November 30 (Wednesday),” said a PSX official, who was part of the divestment process.

Earlier, the management rescheduled the bid opening twice in the current month. “Dates had been extended to complete paper work in compliance with the regulations,” the official added.

Former PSX board director Haji Ghani Haji Usman was of the view that the stake offer may attract prices in the range of Rs25-35 per share. Accordingly, the 40% stake (320 million shares) may fetch $76-107 million for the brokers.

The entry of a strategic partner with management control will boost investor confidence in the market. “This may take the stock market (the KSE 100-share Index) to 50,000 points by June 30, 2017,” he believed.

According to officials, 17 foreign and local strategic investors, including the Chinese and US stock exchanges, have conducted the due diligence of the PSX.

These included the US-based global stock market Nasdaq along with two UK funds, two Chinese bourses (Shanghai Stock Exchange and Shenzhen Stock Exchange) along with one Chinese fund, and several local financial institutions, including MCB Bank, Allied Bank, Pak-Kuwait Investment Company and Pak-Oman Investment Company.

Local institutions cannot make offers for more than 5% stake each according to laws of the State Bank of Pakistan, Securities and Exchange Commission of Pakistan and PSX.

It is premature to say the entire 40% stake will be acquired by a single entity or by a consortium.

The PSX, which reflects ups and downs in the economy, will offer another 20% (160 million) shares to the general public within six months of the completion of acquisition by strategic investors.

In January 2015, three local bourses namely Karachi Stock Exchange, Islamabad Stock Exchange and Lahore Stock Exchange were merged into the Pakistan Stock Exchange.

PSX to attract $1-1.5b

Insight Securities analyst Zeeshan Afzal estimated that the bids would be in the range of $140-220 million. “We see $1-1.5 billion fresh liquidity entering the stock market in 2017,” the analyst said in a note.

The estimate is based on expected inflow of $300-500 million from the MSCI Emerging Markets funds, $140-220 million from PSX divestment, net inflow of Rs540 billion ($5 billion) after maturity of PIBs which will be invested in T-bills or stocks, new corporate fund flows into mutual funds which have already received over Rs40 billion ($380 million) in the last six months, from the booming insurance business, specially life insurance, and the likely amnesty for the real estate, which could bring high net-worth individuals to the documented sectors including the stock market.

With positive news flow all around about the economy and corporate profits as well as large fund inflows, the market price multiples re-rating towards justified levels would be inevitable, which would also provide a conducive environment for the initial public offerings, it said.

Published in The Express Tribune, November 26^th, 2016.

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