PSX becomes regional capital market, may launch CPEC bonds

Chinese consortium signs share purchase agreement to acquire 40% stake

KARACHI: The Pakistan Stock Exchange (PSX) became a regional capital market after the Chinese consortium signed the Share Purchase Agreement to acquire 40% stake in the bourse, officials said Friday.

PSX Chairman Munir Kamal hinted at the launch of CPEC’s (China-Pakistan Economic Corridor) infrastructure bonds for trading in the future after the Chinese, who are investing $54 billion in the corridor projects, take over management control of the market.

PSX Divestment Committee Chairman Shahzad Chamdia said the agreement inked that PSX would get listed at its own trading platform by June 2017.

At present, the stock market is in the process of offering another 20% shares (160 million) to general public, he said.



After this transaction, the 200 PSX brokers will be left with only 40% stakes. Earlier, they had 100% ownership of the market. Full ownership was a conflict of business interest, as they simultaneously were traders at the Exchange as well.

Chinese are expected to pay approximately $85.5 million to brokers in March for the acquisition of the 40% stakes (320 million shares for Rs28 per share).

Earlier, the Chinese-led consortium won the stakes through participation of competitive bidding on December 22, 2016.

The consortium comprises of Chinese Financial Futures Exchange Company Limited, Shanghai Stock Exchange, Shenzhen Stock Exchange, Pak-China Investment Company and Habib Bank Limited.

Finance Minister Ishaq Dar was also present at the agreement signing ceremony that took place at the Exchange.

The minister said the Chinese partners will bring their expertise and will take the market to the next level of developments.

“The index has reached [close to] 50,000 points from just 19,000 points three years ago and I...see no speculation and no inside trading in it,” he said.

Inviting attention of Kamal, the minister said his government has already set up an infrastructure fund like he (Kamal) was talking about CPEC infrastructure bonds for PSX.

The fund, called Pakistan Development Fund (PDF), is worth Rs150 billion. “Soon we will come to discuss the process of launching the fund [PDF] at PSX,” said Dar.



PDF has been setup as a Non-Banking Financial Company. Ministry of Finance has activated the company, said Dar, adding that many international financial institutions, including a Chinese fund, had taken interest to participate in it.

Hu Zheng, CEO, China Financial Futures Exchange (the leader of the Chinese consortium) said that the consortium has the backing of his government in acquiring the 40% stake in PSX.

The China's securities and exchange company has also given its go ahead for the acquisition, he said.

Chinese Ambassador, Sun Wei Dong, said that Chinese will share their experience with PSX partners to bring reforms and launch new products.

This acquisition took place at a significant moment when CPEC-related tangible development is already in progress, he added.

The PSX benchmark KSE-100 Index increased 0.72%, or 351.01 points, to 49,364.83 points on Friday.