The consortium consisting of China Futures Exchange, Shanghai Stock Exchange, Shenzhen Stock Exchange, Pak-China Investment Company (PCIC) and Habib Bank (HBL) have reportedly submitted the highest bid of PkR28/share for the 40% strategic stake (321 million shares) of the Pakistan Stock Exchange (PSX). In the consortium, China Futures Exchange, Shanghai Stock Exchange and Shenzhen Stock Exchange would be allotted an aggregate stake of 30% while PCIC and HBL would each be allotted 5% of the strategic stake post regulatory approvals.
At the onset, this should be positive for the Pakistan market as it should enhance the brokers’ capacity to trade (opportunity to enhance net capital balance). In this regard, the transaction should result in an inflow of PkR 8.9 billion (US$86 million) for around 200 owners of the PSX. Leading Brokerage house, AKD Securities believes that cash proceeds from this transaction can take up to two months to move out of the escrow account.
Other benefits to accrue in the medium to long term include: 1) increase in investor base, 2) up-gradation of technological infrastructure / technology transfer, 3) liquidity inflow from the launch of new products and 4) cross listings and market access for Pakistani companies.
Analysts remain positive on the Pakistan market as the current 21% valuation discount to MSCI Asia Pacific ex-Japan Index is expected to narrow on the back of enhanced liquidity present in the market coupled with formal inclusion in the EM space in 2017 and improving growth rates.