Despite the present government’s determination to create an impression that the stock market performance is reflective of the general economic activity in Pakistan, the public remain unimpressed.
According to approximate industry estimates, there are less than 250,000 individual investors having stakes in Pakistan Stock Exchange (PSX) .
Individual and/or non-professional investors who invest and trade on the stock market are known as retail investors. Institutional investors, on the other hand, handle the money of other individuals, which may or may not include ordinary investors.
In Pakistan, most traditional brokerage houses and investing platforms cater mostly to institutional investors, with the exception of a few financial elites with large enough sums of money to pique these brokerage houses’ attention.
Retail investors, on the other hand, are mostly dependent on their own efforts to study, explore, and enter the stock market. A significant proportion of these investors fall prey to the scams perpetrated by phoney and unregistered brokerage houses, which promise unrealistic returns and defraud unwary small investors.
One online stock trading mobile application is attempting to shatter institutional investors’ and brokerage houses’ monopolies on Pakistan’s stock market. Surprisingly, it is the brainchild of one of Pakistan’s most prestigious brokerage organisations and is backed by a full-fledged financial institution. KTrade is an app developed by KASB Securities, or Khadim Ali Shah Bukhari Securities, a brokerage firm.
In a lengthy discussion with ProPakistani, Ali Farid Khwaja, Chairman of KASB Securities, discussed the obstacles, prospects, and future plans for this new stock trading platform.
Unsurprisingly, “lack of information” is his main difficulty in the Pakistani economy. There isn’t enough information available to educate and inform future and current retail investors about stock market investments.
“Historical considerations are a major concern. We all had jobs in the past, and that was how we comprehended the concept of earning money. So much has changed since then, and despite the abundance of investment possibilities, the stock market remains one of the most rewarding, but most people are unaware,” Ali explained.
“Banks pay an average of 7% interest on savings deposits. When you include in an average of 15% inflation, your true returns from having money in the bank are actually negative,” Ali added, clearly irritated by the Pakistani population’s lack of enthusiasm for equities.
“On the other side, the stock market can provide typical returns of up to 20%,” he concluded. Also, just because the stock market is down does not indicate your investments are going to lose money. It is dependent on individual stocks, and even then, losses occur only if you sell a stock when its price has gone below the price at which you purchased 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.
According to Mahmood Ali Shah Bukhari, CEO of KASB Securities, who spoke to another media outlet, the KTrade application eliminates information asymmetry between High Net Worth individuals and retail investors by providing access to research, and the content of the research is similar for an investor with Rs. 1 million in their account compared to an investor with Rs. 5,000 in their account.
KTrade currently has over 200,000 users registered. The majority of them are imitation traders, with the vast majority of them being students who play and learn about stock trading. The programme gives pretend traders Rs. 1 million in virtual currency to invest in the market at real-time prices.
The company has a programme called “KASB Trading Titans” that follows the same premise and helps it stand out from competitors. It allows users to familiarise themselves with stock market trading in a virtual context by using a mock trading account. According to Ali, there are already 2,000 students competing in fake stock trading from 57 prestigious universities around the country.
Aside from the imitation dealers, the app features actual investors, including 580 companies that have invested over $150 million. KTrade has made a $3 million investment out of this.
The efforts of KTrade are not going ignored in both the domestic and international markets. Hong Kong-based TTB Partners and American HOF Capital have invested $4.5 million in the app. The round included Christian Angermayer, a well-known Fintech investor, as well as notable business groupings.
KASB Securities has also just inked a Memorandum of Understanding with JazzCash, allowing JazzCash users to invest in equities straight from their smartphone, with simple onboarding.
While an individual must supply their CNIC, cellphone number, and source(s) of income in order to open a KTrade account, JazzCash clients are not required to provide any of this information. Their information is already kept in their mobile account, and Jazz sends it directly to KTrade. While KTrade began with only stock trading as an option, it recently obtained a commodities trading licence, allowing customers on the site to invest in mutual funds as well.
Ali isn’t intimidated by the opposition. Other brokerage houses, he believes, will never give up proprietary trading, and so will never be able to shift to the broader public as an investment customer. “Most brokerage firms don’t even provide services to retail clients, but our entire business strategy is built around them.”
When an investor chooses to buy stocks through the app, KTrade receives a transaction commission. Once the stocks have been purchased, the business has no interest in the profits or losses earned by the investors. While KTrade is successful now, the company’s executives are unconcerned about making money in the next three years.
“We are generating enough to meet our expenses, the most significant of which is marketing our app,” Ali explained. For the time being, we must inform people that this choice exists, therefore marketing is our largest investment. In addition, we are lucrative. However, for the time being, we are not focused on earnings; instead, we want to extend and grow our platform.”