New listings have declined drastically and there is a need to make effort to encourage more companies to opt for listing on domestic stock exchanges, speakers at the second IPO Summit on Saturday agreed.
The summit was organised by the South Asian Federation of Stock Exchanges (SAFE) at a local hotel. The Securities and Exchange Commission of Pakistan (SECP) being the chief patron and Karachi and Lahore Stock Exchanges as joint organisers also collaborated in holding the 'Pakistan IPO Summit-2012'.
This was the second edition of the event: the first summit was held at Lahore last year. Speakers also said that the investor base at the domestic capital market was the lowest in the region because of various reasons and there was a need to attract more participants to invest, adding that the equity market still offered better returns than other investment avenues.
Speaking at the inaugural session, SECP's Chairman Muhammad Ali said that SECP had introduced many changes in its regulatory system to promote listings and to make the process of listing accessible and efficient, including, for example, the introduction of book building process and the launch of e-IPO.
He said the SECP was also formulating new regulations relating to listing of SMEs. He pointed out that in the next six months to a year, the country would have a SME Exchange or Board that would allow over 750 small- and medium-sized companies to become listed there.
Assuring the participants that the SECP would continue to make efforts to facilitate companies which aspire to become listed in the future, he said: "Our association with the summit as the chief patron is an indication of our untiring support for the exchanges and other institutions in promoting the cause of listings for the greater good of our market and the economy of Pakistan as the whole."
He said the capital market was passing through a crucial important time, as the SECP had defined new strategy and structural changes.
"It is very encouraging that major capital market institutions of the country including KSE, LSE, CDC, NCCPL and others together with the South Asian Federation of Exchange have continued with the effort to organise the second Pakistan IPO summit after the successful initiative last year in Lahore," he said.
He recalled that more than 330 companies had been approved for listing at local stock exchanges during 1990s because of liberal tax incentives.
He said that events such as the Pakistan IPO Summit were one of ways to reach out to such companies and enterprises.
"The purpose of the summit will be best served when we are successful in highlighting that that the benefits of being part of our capital market should not be allowed to be overshadowed by the fear of losing control over the company by the shareholders," he said. "Instead it should be emphasised that our markets can offer an alternate source of financing new companies and small and medium enterprises at a comparatively lower cost of capital." Former governor of State Bank of Pakistan (SBP) Dr Ishrat Hussain stressed the need for reviving the country's debt market. He appreciated that the daily trading volumes in the domestic equity markets had increased to past levels.
The public interest in recent IPO of Aisha Steel was tremendous, as it oversubscribed by 2.7 times. He also appreciated the SECP initiative to implement e-IPO in the Aisha Steel public offering.
He said that the pool of saving was being invested in contractual saving schemes which are not being utilised. He said investment should be in long term projects like oil and gas, power generation and distribution companies, terminals, pipelines, railways on public-private partnership basis.
He said private sector was willing to take over businesses based on public-private partnership.
He said that everyone had to play his role in the betterment of the country. Only criticising government institutions was an easy way out to throw everything in the lap of regulators, he added.
He said successful IPOs were the only way for country to go up. "Let the capital market flourish and contribute to the (growth of national) economy," he said.
Chairman of the Karachi Stock Exchange Muneer Kamal said that the country's stock markets had done well, but the number of IPO remained very low.
"We need to bring more people to the country's capital market for new listings and investment", he said. He pointed out that the number of investors as per UIN was very low at about 300,000 while even in Bangladesh, the investor base was much higher at 3 million. "We have to go out to convince potential companies to come for listing on the domestic exchanges," he said.
Responding to a question, he said after demutualization, the Karachi Stock Exchange would become a profit-making company and it would have to develop more products.
Later, various sessions were held on different topics wherein experts highlighted issues faced by the domestic capital market.
They also suggested various ways to encourage more companies to become listed at local stocks exchanges and to make the local capital market more vibrant.