PSX goes public

To become a more mature market attractive to international players entry of a strategic partner was necessary move

Editorial December 25, 2016

The Pakistan Stock Exchange (PSX) has been on a consistently upward trajectory despite frequent fluctuations and jolts in progress. It is considered to be the best performing market in Asia and one of the top five in the world. No wonder then that many local and international bidders came knocking on its doors when the PSX decided to sell off part of its shares to a strategic investor. In the end it was the Chinese consortium made up of three exchanges, China Financial Futures Exchange Company Limited, Shanghai Stock Exchange and Shenzhen Stock Exchange, which won out by placing the highest bid. As announced by the PSX on December 23, the Chinese consortium will be sold a 30 per cent share in the market for a total of Rs8.96 billion. Meanwhile, Habib Bank and Pak-China Investment Company have both picked up five per cent shares each.

This is the first such sale of its kind in the region and it is expected to impact the PSX positively. The foreign investors are expected to bring in new technology to improve the PSX’s functioning as well as new investment avenues by luring in Chinese firms for enlistment in the exchange and also by introducing products like futures and options. The PSX also intends to offer 20 per cent of its remaining shares to the public while the rest will stay in the hands of existing 200 members of the exchange. Despite its positive performance, the PSX needs new avenues of growth and it is hoped by market analysts that its divestment to additional shareholders will bring the much needed innovation. At present, the market does not have an international outlook and does not function at the same level as some of the other top stock exchanges in the world. In order to become a more mature market that is attractive to big international players the entry of a strategic partner was a necessary move. The choice of a Chinese consortium makes sense given China’s long-term interests in Pakistan’s economy. Only time will tell now whether these promises of growth and innovation will prove true.

Published in The Express Tribune, December 26th, 2016.

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