PSX set to attract more Chinese investment next year

Potential investors recently visited to discuss modalities of launching the fund

KARACHI: The Pakistan Stock Exchange (PSX) is all set to attract more Chinese investment next year as foreign investors seek approval from their governmental institutions to acquire shares in Pakistan’s top 30-listed companies, officials said on Tuesday.

According to Bloomberg, China Financial Futures Exchange’s (CFFE) Director You Hang said work is being done to introduce a PSX-linked product in China next year.

CFFE is part of the Chinese consortium that acquired 40% stake in the PSX at around $85 million last year.



A high-ranking official at the PSX told The Express Tribune that potential Chinese investors have recently paid a visit and discussed modalities to launch a fund that will invest in the top 30 listed companies in the KSE-30 Index and units of the funds would be traded like stocks at a Chinese exchange.

“These days the Chinese investors are in the process of acquiring approval from its regulators (such as the China Securities Regulatory Commission),” the official said.

He elaborated that potential foreign investors are in the process of establishing a Pakistan linked Exchange-Traded Fund (ETF). The fund would buy stocks listed in the KSE-30 Share Index and deposit them with a custodian in Pakistan. Later on, the investor would sell its (ETF) units in China that would remain available for trade at a Chinese stock exchange like a listed company.

The volume of new investment would be determined by the investor later on, depending on interest among Chinese retail investors.

“US-based Globalx Fund launched two Pakistan linked ETFs, which are listed at the Singapore stock market,” the PSX official said. One of the funds managed by the US fund tracks MSCI Pakistan stocks, he said.

He said the fund would allow Chinese retail investors to take a position in the top 30-stocks via the ETF.

An analyst added investors love to invest in ETFs globally as they are more cost effective and less taxed compared to regular securities available for trade at stock markets.

Local ETFs in pipeline

The PSX official said that two local funds namely Meezan (Al-Meezan Investment Management) and UBL Fund are also in the process of launching similar ETFs in Pakistan. Both companies would launch the KSE-30 Share Index based funds that would get listed at the PSX, he said.



He said that the PSX has introduced the regulations - The Regulations Governing Exchange Traded Fund (ETF) - a couple of years ago.  “Under the laws in place, the PSX may provide system and technology for the launch of funds (locally) and assist as to how to get the fund listed at the bourse.”

Earlier, the PSX chose to be partnered with the Chinese consortium after the latter one assured that it would bring new technology to Pakistan, bring more investment via launch of new products, and provide platform for cross-border listing, it is learnt.

Published in The Express Tribune, November 29^th, 2017.

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