PSX Faces Growing Pains Amidst Successful Inclusion in MSCI Index

Pakistan Stock Exchange (PSX) has successfully concluded the historic upgradation from MSCI Frontier Markets to Emerging Markets status. Although the KSE-100 Index declined by 7.8% during the outgoing week because the Net Foreign Inflows were below the investors’ expectations, the seamless execution of over $1.6 billion in gross traded value demonstrates that Pakistan’s capital market infrastructure is ready to accommodate huge deal flows.

The market closed on the worst note ever last Friday. In four days of trading, the market lost almost 4,000 points and market cap worth Rs653bn was incinerated in a selling frenzy the likes of which has rarely been seen.

The total market capitalization of the PSX nosedived by a US$ 6.22 billion or 7.3%, to US$ 93 billion. In PKR terms, the loss has been more than PKR 653 billion.

According to experts From 25 May to 2nd June:

  • Large Cap fell by 15%
  • Mid Cap fell by 19%
  • Small Cap fell 8% to 13%.

After passing through a big test, the Pakistani bourse and regulator came under criticism for their alleged “failing” in handling the business. The criticism was based on extending clearing date from June 1 to June 5.

Pakistan Stock Exchange (PSX) struggled to handle the historic high foreign trade volume of $987 million conducted on Wednesday.

The National Clearing Company of Pakistan Limited (NCCPL), which supervises the settlements, reported that there has been a delay in affirming a significant number of trades.

The $987 million includes gross buying of $452 million and gross sales of $534 million. The trades were to be settled on June 2 under the T+2 (Trading day + two days) system. The settlements were officially delayed to June 5 which is today.

The allegations leveled include intentionally helping some brokerage houses amid a delay in settlement. But the National Clearing Company -NCCPL denied such allegations saying it was done to facilitate smooth completion of trade volumes that were huge and the custodian banks were unable to affirm orders for execution.

It has been noticed that those brokerage houses or individual brokers who did not have foreign clients with big exposure or individual fortune makers who failed to benefit due to sluggish market trend ahead of transition were the ones critical.

Nadeem Naqvi, Managing Director PSX earlier talking to a News channel said all regulators were geared up to handle the additional volumes and facilitate transactions on June 1. “No foreign investor has complained about the handling of business while transition took place, said Muzzamil Islam CEO EFG Hermes in Pakistan.

Market watchers and followers believe that making transition controversial would reflect negatively on Pakistan and create doubt in the minds of investors. Some cited local business rivalries, vested interests and failure of some brokers/investors in making windfall profits (as they expected) on this transition as the main reason for criticizing and leveling allegations.

  • wow, its a good news actually (ignoring the late settlement part), i mean a normal daily foreign volume of 150m$ to 900m+$. its huge actually. lets see how we can benefit of this global outreach….

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