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PSX divestment: heights and delights

On Jan 21, 2017 the PSX signed an agreement for the sale of 40 percent strategic shares in the Pakistan bourse with a Chinese consortium, comprising three Chinese exchanges — the China Financial Futures Exchange Company Limited (lead bidder), the Shanghai Stock Exchange and the Shenzhen Stock Exchange. As a result, Pakistan Stock Exchange (PSX) became first South Asian self-listed stock exchange on 29th of June 2017.

Reforms and improved governance structure impressed upon MSCI to reclassify PSX from Frontier Markets to Emerging Markets in May 2017. KSE-100 Index made all-time high of 52,876 on 24th of May 2017 and Market Capitalization crossed PKR 10 trillion hallmark.

The foreign investors offloaded securities worth USD 123.9 million during July 2017-March 2018 which was absorbed by domestic individual investors, companies and insurance companies. This strong buying by local investors reflected a higher degree of the confidence of the investors in Pakistan equity market.

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Having bought 320 million shares of the PSX at a price of Rs28 per share, the Chinese Consortium engaged M/s Mckinsey as a consultant to boost earnings. This consultant provided solutions to regulatory issues for the launch of Exchange Traded Fund (ETF), Index Futures and Options. And also suggested measures that could double the daily volume of trade at the stock market and identified weaknesses, which if removed, can increase PSX’s revenues within a year.

On January 10, 2018, the Chinese Consortium handed over the charge of PSX to Mr. Richard Morin. The Investors and Intermediaries rejoiced with the regulators who looked forward to “rejuvenated, complied and robust development of the PSX” through the introduction of new products, enhanced investor base, transfer technology on BOT basis, and new listings.

 

On 28th of May 2019, the aforementioned hopes were swindled when Mr. Morin was shown the door the PSX Board over the pretext of false declaration and account of being short of delivery against every assigned targets.

Today’s market is at a juncture of Dead-Cross, which is a technical terms and it refers to a situation when 50 days moving average is worse than 200 days moving average.

Crises are led by the meltdowns when Investors are unable to recoup their basis owing to sustained bearish trend. This is the third consecutive year, that PSX is observing an array of loses.

sanipic2On the product side, the Exchange has lost liquidity in the existing conventional products and new products are far from being launched owing to structural impediment, which aren’t gorgeous enough to attract the even an eye ball contact with the intellects at the helm.

PSX has a Big Mess, as it is short of domain knowledge experts in the active products and abundant in the inactive products.

Richard Morin’s decision to set aside the recommendation of SECP constituted Committee’s independent reports and having been failed to come-up with better recommendations, needs an analysis as to whether the same was act of “Omission” or “Commission”

It is on the tip of the iceberg that neither did the Mckinsey nor did the exotic CEO made an iota of difference in the wake of PSX Divestment.

Post Divestment, It was perhaps a bad Plan or a bad Executor, which exposed PSX to many downsides such as governance, capitalization, competence and operating loss— THIS IS SOMETHING, WHICH NEEDS TO BE FORENSICALLY AUDITED BY THE COMPETENT JUDICAL FORUMS INCLUDING THE COMMISSION AND/OR THE POLICY BOARD.

Sani-e-Mehmood Khan, the author is the CEO of Securities Exchange Management Suite and a former General Manager, Pakistan Stock Exchange (PSX)

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