Certain effective checks and systematic changes recently applied by Securities and Exchange Commission of Pakistan (SECP) bring transparency to Pakistan Stock Exchange (PSX) and brokers’ business. Thus, Pakistan becomes a big attraction especially for foreign investors.
Economic indicators of the country were positive. China-Pakistan Economic Corridor (CPEC) had also changed the sentiments. The liquidity in capital market had increased. The net selling in the capital market had significantly jumped up, which was absorbed by local investors and non-business finance companies (NBFC), said Umer Pervez, Executive Director, Research and Business Development, AKD Securities Limited, in an interview with APP here.”Capital market is up and the minimum return is 20 percent,”he expressed his satisfaction.
He said the business sentiments had witnessed 50 to 60 percent improvement as a result of better law and order situation, and political stability in the country. The economic growth in the country was mainly CPEC related. There were certain risks in the capital market and we had to depend on commercial borrowing. However, the market was positively pursuing, Umer Pervez observed.
The expert of capital market recalled that from 1992 to 2008, Pakistan’s capital market was one of the emerging markets on world screen. After global finance crises, he continued, Pakistan market was put under the floor (at low profile).
However, after the market reforms in Pakistan introduced by the present government, the corporate disclosure was strong. This helped Pakistan to regain its position. In January 2016, the Modern Index Strategy Indexes (MSCI) announced to include Pakistan among the emerging capital markets category.
The sentiments were good. Last year, 46 percent return was posted on investment in capital market. MSCI is a United States based investment research firm. In November and December 2016, the market boomed with return up to 50 percent; after Pakistan Tehreek-i-Insaf (PTI) called off its sit-in, he mentioned.
He said the market risks and assets under management (UMS) determined the equity and dead total position. The UMS were up by 28 percent and the equity had enhanced by 50 percent.
The investment diverted to equities from real estate sector due to certain irritants cropped up there as a result of certain decisions/policies of Federal Board of Revenue (FBR), which included introducing new formula for valuation of property and taxation accordingly.
The estate dealers rejected the section three of Income Tax Ordinance, which has been by amended. The estate agents from all over the country had been voicing their reservations /concerns over this issue.
From July 2016 to November 2016, the prices in real estate dropped by 40 percent and this caused capital flight as well, he pointed out.
Director R and D, AKD Securities , Umer Pervez welcomed the huge investment of dollars 8.9 billion in Pakistan Stock Exchange (PSX) by Chinese consortium and two local companies — Pak-China Investments and Habib Bank Limited (HBL). Chinese consortium purchased 30 percent shares of PSX and the two local companies had 5 percent shares each. The bids were high at Rs 28 per share. This foreign investment had further strengthened our capital market capacity.
He told that at present the corporate profitability in Pakistan was 14 to 15 percent. Last year, it was in negative territory. He said the price to earning (PE) ratio was 10 percent. The discount at PE rate was 30 percent. From June 2017, the revival on this account is expected.
He noted that import cover was good enough to finance six months import bills of the country. The Pak Rupee was stable and foreign direct investment inflow especially from China was very good. This FDI was mainly coming to energy and infrastructure sectors. He foresaw at least dollars 300 million more investment in Pakistan in near future.
He was also confident that textile industry would also take off after the export policy would be announced by the government; which was expected soon.
He listed the exports of the country , remittances from Overseas Pakistanis, FDI and loans were the main contributors to building capital market.
On this occasion, the capital market researcher emphasized on the implementation of incentives package for the Overseas Pakistanis that was announced by the government to encourage the inflows from them.