LAHORE
The demutualization committees of the Karachi and Islamabad stock exchanges have reached a deal for their merger while Lahore Stock Exchange has failed to strike any deal in this regard so far. The management of both the exchanges will announce their merger deal very soon, stock market officials said on Tuesday.
The Lahore Stock Exchange and Islamabad Stock Exchange are already engaged in talks for the past few years to finalize the agreement of their merger but there has been no agreement between both so far. However, both the markets, under an agreement, are trading their shares through a Unified Trading System, using single platform for sale and purchase of stocks.
Under this Unified Trading System, an investor can conduct the shares trading of any company listed both at LSE and the ISE. After the merger of stock markets, the investor would be able to trade the shares of the company from LSE platform even if it is not listed at LSE, stock market officials said.
According to sources, the Securities and Exchange Commission of Pakistan (SECP) has notified the constitution of a committee to merge the three stock exchanges that would be later offered to some strategic foreign investor.
In another development, a Turkish company has submitted a letter of intent (LoI) to the Securities and Exchange Commission of Pakistan for the purchase of 40 per cent shares of Karachi Stock Exchange under the divestment plan to complete the demutualization process of stock exchanges after a long delay of around three years.
Chairman of AKD Securities and AKD Group Aqeel Karim Dhedhi, talking to The Nation, criticized the requirements stipulated in the Stock Exchanges (Corporatization, Demutualization and Integration) Act, 2012 in relation to divestment of 60% shares of the stock exchanges lying in the blocked account to the Strategic Investor(s) (SIs), general public and local financial institutions.
“Demutualization Act, 2012 has restrictions that only strategic foreign buyer can purchase the 40 percent management share of the stock exchanges which has delayed the demutualization process for around three years. The SECP should adopt free market mechanism for a healthy competition, giving the chance both to local as well as foreign buyers.”
“Thank God that a Turkish company has shown interest of buying the KSE shares before the last date which is 25th August 2015,” he said. The Turkish delegation has reached Pakistan to finalise the purchase of 40 per cent shares of the KSE worth around Rs4-5 billion.
Aqeel Karim Dhedhi, a noted businessman and stock market tycoon, said that it is good omen for Pakistan that a foreign investor is ready to invest in Karachi stock market which will attract other investors too. But the SECP will have to remove this restriction of strategic foreign buyer for purchase of stock exchanges shares, as demutualization process of LSE and ISE will further be delayed.
Aqeel Dhedhi observed that with growing economic activity and business friendly policies of the government the capital market of the country possesses the potential of emerging as a regional investment hub. He reiterated that providing a fair and transparent market that complies with international best standards is the key to development and the brokers stand with the SECP in its efforts to ensure the same.
While the first crucial step in the transformation of the Pakistani capital market has been taken with the demutualization of stock exchanges, integration would be revolutionary measure that would assist in bringing the market at par with global counterparts.
According to stock market experts, demutualization process has three steps including corporatization under which 40 percent shares of stock markets have been sold to brokers or members. The second process will be the further sale of 40 percent shares to strategic foreign buyer. After this, the remaining 20 per cent shares will be sold to general public to complete the demutulization process of stock exchanges, experts added.
As required under the Act, the SECP had issued directions to the stock exchanges for completion of the divestment process by August 25, 2015. The stock exchanges had been in contact with various international exchanges for divestment of stake to SI and/or technical collaboration. However, nothing concrete was materialized till the mid of August 2015, as no firm commitments were received from any counterpart in this regard.
Experts said that the international trend on integration of stock exchanges helps reduce fragmentation and through integration, markets benefit from operational synergies, cost cutting, economies of scale and streamlined regulation.
The Stock Exchanges Act empowers the SECP to conclude the divestment process if the exchanges are unable to abide by the timeline.