Pakistan pegs future of capital markets with blockchain technology

Government says it could be looking at next ‘incarnation of stock market’

KARACHI: In a welcome move, the government has pegged the future growth of capital markets with the usage of blockchain technology, sending a clear message that it is ready to adopt latest trends to keep pace with the rest of the world.

Days after the State Bank of Pakistan (SBP) barred investment in digital cryptocurrencies, inviting criticism over its reluctance to adopt technology, the government stated in the Pakistan Economic Survey 2017-18 that it “could be looking at the next incarnation of the stock exchange” through the use of blockchain.

“Blockchain is fundamentally changing the way people invest in companies,” stated the Economic Survey 2017-18. “We could be looking at the next incarnation of the stock market. In Pakistan, the SBP has proven itself very progressive in the area of digital finance.”

Global capital markets and the financial industry in general are currently experiencing a wave of innovation, triggered mostly by technological breakthroughs.

PSX

On the other hand, the Economic Survey stated that the PSX is entering a new era of equity trading.

The benchmark decreased 257 points on Thursday, ending the day at 45,460.87 as the bearish run, triggered by political and economic uncertainty, continued at the bourse. “During fiscal year 2018, the performance of the stock market presented a mixed trend between July and December; however, the KSE-100 resumed its momentum from the start of January 2018,” the survey said.

“There are many factors that brought a swing in emotions of the investors, which in turn changed the buying pace or selling activity.

“Pakistan has entered a new era of equity trading; however, performance of Pakistan’s capital market will depend on domestic and international economic conditions in the future,” it said.



Pakistan Mercantile Exchange

The Securities and Exchange Commission of Pakistan (SECP) also approved future commodity contracts that includes Brent crude, crude oil (1,000 barrels); copper (25,000 pounds); silver (5,000oz) and international cotton (50,000 pounds).

Furthermore, the contracts relating to cross currency pairs, ie EUR/Yen, GBP/EUR, GBP/Yen, CHF/Yen, AUD/Yen, EUR/AUD, EUR/CHF & AUD/CAD, as well as US Equity Indices - S & P, Dow and Nasdaq were also approved and successfully launched at the Pakistan Mercantile Exchange (PMEX) platform.

In order to meet financing needs of financial institutions through the Shariah modes, the SECP, in collaboration with the SBP, has launched a three-month pilot project on the commodity murabaha product. On the regulatory side, the draft Future Brokers Regulations are under stakeholder consultation.

Debt capital markets

A well-developed corporate bond market is essential for the growth of economy as it provides an additional avenue to the corporate sector to raise funds for financial needs. During July-Feb FY18, 17 debt securities were issued. “Capital markets play a pivotal role in mobilising domestic resources and channelising them efficiently for productive uses, thus raising national productivity.

“The level of capital market development is an important determinant of level of savings, efficiency of investment and ultimately rate of economic growth,” the survey said. 

Published in The Express Tribune, April 27^th, 2018.

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