SECP proposes foreign investors’ participation in PSX shares

Currently, they cannot buy the stock that is trading at Rs17.46

KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has proposed a regulation that would allow foreign investors to buy shares of the Pakistan Stock Exchange (PSX) - the company - that is listed on the bourse.

The proposal comes after stock market brokers, who have a 40% stake in the company (PSX), were long demanding the regulator to lift the ban on ‘foreigners’ participation’ in its day-to-day trade, arguing that when they can trade in any of the listed companies then why not in PSX shares.

The SECP has proposed to allow foreign investors to ‘collectively’ acquire or hold a maximum 10% of the issued shares and, if it finds it appropriate, the limit can then be expanded to 20%. The regulator has invited public comments on the proposals by December 19, 2017. For this purpose, the SECP has proposed amendments in the Stock Exchanges (Corporatisation, Demutualisation and Integration) Regulations, 2012.



“In regulation (43) of the regulations,- (a) Clause (i) shall be replaced with the following: “ (i) foreign persons, other than foreign anchor investors, shall not collectively, whether directly or indirectly, acquire or hold more than ten percent of the total issued share capital of the Exchange.

Provided that the Commission may, if it deems fit in the interest of capital markets, increase the limit of shareholding for foreign persons, other than foreign anchor investors, to 20% of the total issued share capital of the Exchange,” SECP said in a notification proposing the amendments.”

Earlier this year, a Chinese consortium acquired a 40% stake (320 million shares) at Rs28 per share in the PSX, which translated to around $85 million, through competitive bidding in January.

During the outgoing calendar year, the PSX management sold another 20% (160 million shares) to the general public through book building. However, the PSX’s share price failed to go over the proposed floor price of Rs28.

Its share price closed at Rs17.46 with a gain of 5.24%, or Rs0.87, with a volume of 326,000 shares on Wednesday.



Circuit breaker regulations

Separately, the PSX had earlier also proposed to widen the upper and lower limits of share price fluctuation to a maximum 15% from the existing 5%. In addition, it has also proposed to halt trading at the PSX in case the ‘KSE 30 Index’ touches the limit of 15% at any point of time.

A high-ranked official explained the proposals were made “to attract liquidity instead of making the market more volatile.”

Such proposals are being made at a time when the benchmark KSE 100 Index has dropped over 26% from its all-time high on May 24, 2017.

Published in The Express Tribune, December 14^th, 2017.

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