Pakistan, with its $3 billion investment universe post MSCI upgrade to Emerging Market index in May 2017, would be lacking "depth" in terms of market capital and liquidity, said MD PSX Nadeem Naqvi here Tuesday. Talking to journalists at Karachi Press Club on Tuesday, he said that while huge global funds worth $1.5 trillion were tracking the MSCI's emerging markets, Pakistan would be weighing less than 0.2 percent on the new index post May 1 next year.
"Pakistan's weight would stand somewhere at $3 billion (in Emerging Market index)," said Naqvi. Flanked by PSX chairman Muneer Kamal, Deputy MD Haroon Askari and Sani-e-Mehmood, the managing director said during recent road shows foreign investors told his team that "your market still lacks the depth we need for investing therein". Naqvi believes that Pakistan stocks market's current $71 billion market capital should be raised to $100 billion and the daily average traded value to $500 million.
This, he suggests, should be done by the government through listing mega infrastructure projects under $46bn China-Pakistan Economic Corridor, divestment of government shareholdings in loss-making state-owned Enterprises and accelerating the introduction of derivative products on equity market. Against EM's 16-18 percent, Pakistan's PE stood at 10 percent, implying a 50-60 percent required growth in theory.
Earlier, Kamal said it was in September 2012, before the election of present PML-G government in May 2013, when his side had first applied to MSCI for a reclassification. "We met the MSCI representatives in London in September 2012 given Pakistan's stabilising economy," the chairman told journalists.
Dubbing as a "big mistake" what he said the closure of stocks market for three months in December 2008, Kamal said his side further pressed on its request for reclassification when the global index provider in 2014 upgraded Qatar and UAE to EM index. The two bourses, he said, were not better in performance than Pakistan. "MSCI finally agreed to put us on its review in June 2015".
Terming the country's macroeconomic indicators as "stable", the PSX official said the MSCI upgrade would not make Pakistan a heaven but a trickledown effect would certainly help in poverty alleviation. Explaining, Naqvi said during last three years the 30 listed companies benchmarked in KSE30 Index had reported a cumulative profit after tax of over Rs 1 trillion. "Over 100,000 people work in these 30 firms," he said.
Kamal said long-term sustained development had a direct link with poverty alleviation, illustrating China which, he said, had saw its stocks market developing into the world's second largest bourse within a short period of 15 years. "In 1990 China had no stocks exchange," he recalled. To a question, Naqvi said globally the investor base of stock exchanges was changing. Some 20 years back, he said, the percentage of retail investors on Pakistan bourse was 70-80 percent. Presently, the investor base at PSX is consisting of 30 percent foreigners, 30 percent institutions and 40 percent retailers.
"This (40pc) percentage would go down further, going forward, he added but said SECP was all out to set up capital market hubs across Pakistan to address this issue. Having established one in Faisalabad, the apex regulator was due in Peshawar and other cities of the country for such hubs. "We would see a significant increase in retail base within next two years," he said.
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