Chinese investors likely interested in taking majority stake in PSX

Currently, they hold 30% shares, can increase the holding to 51%

KARACHI: Chinese investors are eager to increase their stake in the Pakistan Stock Exchange (PSX) beyond their current 30% shareholding whereas the bourse itself is taking measures to step up its earnings, a former chairman of the exchange disclosed on Friday.

“The Securities and Exchange Commission of Pakistan (SECP) should scrap the condition that prevents foreign strategic investors from taking their shareholding beyond 30% in the three years (since the acquisition of the stake),” Arif Habib, former PSX chairman, said while addressing the audience gathered to mark the self-listing of PSX.



“The lifting of the restriction will allow Chinese investors to increase their stake to the maximum 51%. This will attract additional foreign inflows and help increase market’s depth,” he emphasised.

Rumours about Chinese interest in taking a larger stake had been doing rounds in the market before they acquired the 30% stake in January 2017.

They (China Financial Futures Exchange Company Limited, Shanghai Stock Exchange and Shenzhen Stock Exchange) acquired the shareholding as part of a consortium, led by them, that took a total of 40% stake in PSX.

The remaining 10% stake was acquired by two local financial institutions - Pak-China Investment Company and Habib Bank Limited, which were part of the consortium.

Unblocking brokers’ stake

PSX, which was owned by 200 brokers, has so far sold its 60% stake (480 million shares at Rs28 per share) to the Chinese consortium, high net-worth individuals, institutional and retail investors through competitive bidding and book building.

Habib added the 200 brokers still owned 40% stake (320 million shares) in PSX. However, the shares are useless to them as they are kept in a blocked account of the Central Depository Company (CDC).

“The SECP should ask the CDC to unblock the account...SECP should endorse the shares as BMC (base minimum capital) shares so that brokers may deposit them as collateral with banks and acquire financing against them. This may increase liquidity in the market,” he said.

Allow foreigners to trade

PSX Divestment Committee Chairman Shahzad Chamdia said PSX had become self-listed and its shares were available for trade at the exchange from Thursday.

However, foreign investors are ineligible to trade PSX shares since they have acquired the maximum 30% stake.

The SECP should lift the ban on trade in PSX shares by the foreigners as “it will allow PSX shares to discover their true price”, he said.

PSX shares, which opened trade at Rs28 per share, hit the lower limit of 5% and closed at Rs26.60 with a volume of 2.6 million shares on Thursday. They lost another 3.46% to Rs25.68 with trading in 6.5 million shares on Friday.

Public offer

The PSX share price has continued to drop after the bourse held its Initial Public Offering (IPO) and offered shares to high net-worth individuals, institutional and retail investors recently.

PSX extended the book building three times to attract the required number of investors. Moreover, PSX share price did not increase beyond its opening price of Rs28 in the five-day IPO.



“The IPO flopped for two reasons - non-tax return filers were not allowed to participate in the book-building process. Secondly, the minimum investment limit per participant was set at Rs3 million against Rs1 million in other book buildings,” Chamdia said.

Published in The Express Tribune, July 1^st, 2017.

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