A single stock exchange for the whole country has finally been approved. According to reports, a merger between Islamabad, Lahore and Karachi stock exchanges has been accepted. The three stock exchanges will join to become Pakistan Stock Exchange. Signatures on the memorandum are expected today.
Due to a steep decline in Chinese equities, the global markets have gone in turmoil. Pakistan was also hit by the sudden change in stock values and KSE was affected the most in the recent turn of events. According to a trader, “Foreign investors have been booking losses in (emerging) equity markets plus commodity derivatives elsewhere. They have to make up for those losses by selling profitable stocks in their portfolio elsewhere.”
Pakistan has also been under pressure from International Financial Institutions (IFIs) and the Securities and Exchange Commission of Pakistan (SECP) had notified the constitution of a committee to merge the three stock exchanges. There have been suggestions from the government committees to later offer the stock exchange to some foreign investors. UAE and Sri Lanka have shown interest in acquiring Pakistan’s stock exchange.
Due to the merger, ISE and LSE will be effected greatly because KSE has been seeing a downwards trend for months.
Due to the merger, ISE and LSE will be effected greatly because KSE has been seeing a downwards trend for months. The government has been looking at the Indian Stock Exchange model for the merger. Members from ISE and LSE showed concerns and even refused the proposal which even delayed the merger approval process by quite a few weeks.
The government committee was tasked to review the current corporate structure of the stock exchanges in line with the Stock Exchanges Act 2012.
The step was taken to stabilise the KSE, which was Pakistan’s biggest stock market, and had been affected by global financial turmoil. For the greater interest of the Pakistan stock exchange, the merger was approved after extended meetings with the LSE members when they refused the proposal a few weeks ago.
This is the first crucial step in transformation of Pakistan Stock market. The demutualization of stock exchanges and integration will assist in bringing the market on par with global markets, increasing stock values due to the inheritance of LSE and ISE assets.
The demutualization of stock exchanges and integration will assist in bringing the market on par with global markets.
The local competition between the local stock exchanges will also be avoided letting them consolidate their complete energies in attracting foreign investments. PSE will now be able to continue trading and have better resilience against the international financial crises whenever they occur.
Ownership of the stock exchanges can be shared between brokers and investors with a ratio of 40 to 60 percent. After the introduction of the new capital reform, trade volume is expected to improve several-fold as well. Foreign investments in Pakistan stocks can increase and help local and international investors to share trades locally which was previously not possible unless a company was listed in all three stock exchanges.