KARACHI: A start-up-dedicated board has been launched by the Pakistan Stock Exchange (PSX) to help small and medium-sized companies collect funds by listing on the capital market, its managing director said.
PSX MD said the listing regulations are simpler for the GEM board, although the cost of listing is also lower. In a few years, smaller companies listed on the GEM board could opt for the mainboard as they mature.
PSX Managing Director Farrukh Khan told The News that the board of the Growth Enterprise Market (GEM) will encourage listing on the stock exchange and raising capital for small and medium-sized enterprises, greenfield ventures, and tech startups.
The Director further added, “Around six companies have already initiated the listing process. We expect the first listing on GEM board by the end of this fiscal year. There are restrictions for the investors because it is a high-risk market, and only qualified investors could invest in GEM.”
A state-of-the-art trading and tracking system is being introduced on the market, which would also promote new products such as options and index trading, the PSX head said. “The $5 million trading and surveillance system offered by Shenzen Stock Exchange would be implemented in the first quarter of 2021,” he said.
Khan said in consultation with the Securities and Exchange Commission of Pakistan, several listing-related regulations were relaxed, while several flexibilities were introduced to increase listings. “Moreover, the volumes are high at the market and companies are getting good valuations, which is why several companies are coming to the market,” he said. “After a gap of 15 months, we have seen three public offerings at the PSX in the last three months, while around 10 more public offerings are in the pipeline, which would be materialised this fiscal year.”
“Presently, the futures market offers only 30-day futures contracts, and we are increasing this time period to 90 days,” he said. Khan also said that the ETFs are the perfect product for small investors because like mutual funds, they offer diversified exposure. For small investors, the account opening criteria are pretty difficult. Mutual funds and ETFs can be opted for by small investors. The introduction of exchange-traded funds earlier this year was part of the ongoing initiative to place the stock market of the country on a par with global peers. He also revealed that the exchange traded funds (ETFs) have already been launched and the product is being produced by PSX. In addition, with more firms entering the qualifying list, the futures market is being redesigned.
Hybrid protection can be considered for ETFs. Like equity shares, they trade on the stock market while the price is extracted from the underlying assets, much like mutual funds. ETFs have gained global prominence among large institutional investors, typically considered passive investments that seek to follow the movement of a defined benchmark. By the end of last year the funds invested in the global ETF industry had reached close to $6.3 trillion. Khan said that when the lockout was placed in March, disaster recovery and business continuity processing were all in operation.
“This is the reason that the PSX operations didn’t stop for even a minute unlike regional exchanges such as Sri Lanka and Bangladesh,” he said. “Due to the measures taken by the government including lowering of interest rates, flexible fiscal policy, and social initiatives, Pakistan’s economy is rebounding much faster than other countries. If such foreign selling had been there a few years ago, the market would have crashed,” he went to say.
As the second wave is coming, PSX MD said there may be difficulties. The flow of portfolio investments will be influenced by the problems in international economies, he said. All emerging markets are experiencing international sales, but the global offloading is being absorbed by sufficient local liquidity at PSX.
