Despite the incumbent government’s insistence to create an impression that the stock market performance is indicative of the overall economic movement in Pakistan, the masses remain unmoved.
According to rough industry estimates, there are less than 250,000 retail investors with stakes in Pakistan Stock Exchange (PSX).
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Retail investors may be understood as individual and/or non-professional investors who invest and trade on the stock market. As opposed to these, the institutional investors, on the other hand, manage other people’s money which may or may include retail investors.
In Pakistan’s case, most of the traditional brokerage houses and investment platforms cater primarily to the institutional investors, exceptions being the few financial elites who have sums of money big enough to capture the interest of these brokerage houses.
Retail investors, then, are mostly left at the mercy of their efforts to learn, experiment, and enter the stock market on their own. A notable number of such investors also fall victim to the scams of fake and unregistered brokerage houses, which promise unrealistic returns and fleece unsuspecting small investors of their money.
One online stock trading mobile application is trying to break this monopoly of institutional investors and brokerage houses over the stock market of Pakistan. Interestingly, it is an initiative of one of Pakistan’s renowned brokerage houses and has the backing of a full-fledge banking institution as well. The app is KTrade, by the brokerage house KASB Securities, or Khadim Ali Shah Bukhari Securities.
Chairman of KASB Securities, Ali Farid Khwaja, shared the challenges, opportunities, and the way forward for this new platform of stock trading with ProPakistani in a detailed interview.
Unsurprisingly, his biggest challenge in the Pakistani economy is “lack of information.” There is not enough information available to inform and educate potential and current retail investors on investments in the stock market.
“Historical reasons are a huge issue. Traditionally, we all just had jobs, and that is how we understood the concept of making money. Now so much has changed, and even with multiple investment options available, the stock market remains one of the most profitable options, but people are just not aware,” Ali said.
“The banks offer an average return of 7 percent on saving deposits. Subtract from that an average of 15 percent inflation, and your real returns from keeping money in the bank actually become negative,” Ali said in an audibly agitated voice over the lukewarm interest of the Pakistani population towards stocks.
He continued, “Stock market, on the other hand, can give up to 20 percent in average returns. Also, when the stock market goes down, that does not automatically mean that your investments will turn into losses. It depends on individual stocks, and even then the losses only materialize if you choose to sell a stock when its price has fallen below the price at which you bought it.”
KTrade is on a dedicated mission to change the negative perceptions that the general public might have about the stock market, and they are attacking the problem from multiple angles at the same time. This has also resulted in marketing being their biggest expense since the app started operations in October 2019.
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According to Mahmood Ali Shah Bukhari, the CEO of KASB Securities, who spoke to another media outlet, the KTrade application eliminates the information asymmetry between High Net Worth individuals and retail investors by making access to research, and the content of the research is similar for an investor who has Rs. 1 million in the account compared to an investor who is starting with Rs. 5,000 only.
Presently, KTrade has over 200,000 registered users. Most of these are mock traders, with an overwhelming majority of students among them who play and learn about stock trading. The app offers Rs. 1 million in virtual currency to mock traders to invest in the market at real prices.
On the same theme and to set itself apart from competitors, the company has a program called “KASB Trading Titans.” It allows users to acquaint themselves with stock market trading in a virtual setting through an account that allows mock trading. Ali said that presently, there are 2,000 students from 57 renowned universities across the country who compete against each other in mock stock trading.
Apart from these mock traders, the app also has real investors, including 580 companies, with over $150 million in investor money. Out of this, $3 million has been invested through KTrade.
KTrade’s efforts are not going unnoticed in the local and international markets. The app recently raised $4.5 million in funding by Hong Kong-based TTB Partners and American HOF Capital. The renowned Fintech investor, Christian Angermayer, and prominent business groups were also part of the round.
Moreover, KASB Securities has also recently signed an MoU with JazzCash that will enable JazzCash users to invest in stocks directly from their application, with easy onboarding.
While an individual requires to provide their CNIC, mobile number, and source(s) of income to start operating an account on KTrade, the customers of JazzCash do not need to provide any such information. Their information is already stored at their mobile account, which is shared by Jazz to KTrade directly.
While KTrade began with the sole option of stock trading, it also secured a license for commodity trading two months ago, which has allowed the investors on the platform to also invest in mutual funds on the application.
Ali is not afraid of the competition. He is convinced that other brokerage houses will never let go of proprietary trading, and that will never allow them to move to the general public as an investing customer. “Most brokerage houses do not even offer services to retail investors, while our entire model is focused on them.”
KTrade gets a transaction commission whenever an investor chooses to buy stocks through the app. The company has no stake in profits or losses made by the investors once the stocks have been purchased. While KTrade is already profitable, the company leadership is not worried about making money for the next three years.
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Ali said, “We are earning enough to cover our expenses, the biggest of which is marketing our app. We have to tell people for now that this option exists, so our marketing is our biggest expense for now. And we are profitable as well. But we are not focused on profits for now, we want to expand and grow our plartform.”
