SECP allows foreign investors higher shareholding in PSX

Published: March 3, 2019
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Now, the investors can buy 20% of issued share capital of PSX. PHOTO: FILE

Now, the investors can buy 20% of issued share capital of PSX. PHOTO: FILE

KARACHI: The Securities and Exchange Commission of Pakistan (SECP), the apex regulator, has given the go-ahead for increasing the shareholding of foreign portfolio investors in the Pakistan Stock Exchange (PSX).

Foreign individual and institutional investors may now buy, hold or trade PSX stocks up to maximum 20% of outstanding shares estimated at around 800 million.

Earlier, the regulator had limited the shareholding of foreign portfolio investors in the PSX at 10%.

The maximum number of shares available for trade at the PSX trading platform is also equivalent to 20% of the issued paid-up capital.

However, “as per SECP’s requirement, it is mandatory for a foreign person to disclose if they have 1% holding of PSX shares or for a foreign institution to disclose if they have 2.5% holding of PSX shares,” the PSX said in a statement issued on Saturday.

The rule for limiting foreign investment in listed stocks at the bourse is only for the shares of PSX as a company. Otherwise, the investors may acquire any percentage of shares available for trade at the bourse.

“PSX is a national institution; authorities want to spread its shareholding (by involving maximum number of investors) through limiting shareholding of foreign individual and institutional investors to a certain percentage,” said Shehzad Chamdia, who headed the work on corporatisation, demutualisation and integration of stock exchanges in the past.

Market Development: SECP focused on PSX reforms

The SECP has increased the shareholding limit on foreign persons or institutions under the Stock Exchange (Corporatisation, Demutualisation and Integration) Regulations 2012. “As per this announcement, the limit of holding of PSX shares by foreign persons or institutions has been increased to 20% of the total issued share capital of the PSX,” the statement said.

“The SECP has advised the PSX and the Central Depository Company (CDC) to coordinate and put in place a mechanism and system that can allow for the increase in the holding limit of PSX shares by foreign persons or institutions.”

Apart from the 20% ordinary shares available for trade at the PSX, 40% of the stake in PSX company is held by a Chinese consortium, which acquired the stock exchange through competitive bidding during the demutualisation and corporatisation process, which was completed in 2017.

The Chinese consortium bought the 40% stake (320 million shares) at Rs28 per share. The remaining 40% stake in the PSX is owned by 200 stockbrokers, who were previously owners of the stock exchange.

The SECP allowed foreign investors to trade PSX shares on a daily basis in December 2017.

Arif Habib Limited CEO Shahid Ali Habib said there was a great demand from foreign investors who wanted to increase their shareholding in the PSX. “Foreign investors have the appetite for PSX shareholding. The increase in the limit for foreign portfolio investors should help PSX shares to discover their true price…I hope the share price should go up,” he said.

PSX Managing Director Richard Morin said the other day the Chinese consortium had devised a strategy to transform the bourse into a world-class capital market in the next two to three years.

Both the Chinese and Pakistani shareholders came to the conclusion that they should transform the PSX by increasing the number of investors into millions from a quarter of a million at present, cross-border listings, introduction of new investment instruments.

Published in The Express Tribune, March 3rd, 2019.

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