Chinese bourses express interest in acquiring 40pc stake in Pakistan stocks

KARACHI: At least three Chinese bourses expressed their interest to jointly acquire 40 percent stake in the Pakistan Stock Exchange (PSX) – the country’s main capital market, which was demutualised to pave the way for its shares’ trading in public.

A source privy to the potential deal told a Chinese daily newspaper that Shanghai Stock Exchange (SSE) along with two other exchanges have already submitted a letter of intent to the PSX.

The daily, quoting another Internet media, said SSE, the Shenzhen Stock Exchange and the China Financial Futures Exchange wanted to buy all stake on sale.

The PSX has been searching for strategic investments since its demutualisation, which requires it to divest 15 to 40 percent of its shareholdings. The PSX was formed in January by consolidating the Lahore, Karachi and Islamabad stock exchanges.

In July, the bourse invited companies to show interest in buying a stake of up to 40 percent.

By late August, the PSX received an overwhelming feedback from 17 foreign as well as local investors in response to its invitation, a spokesman told The News.

Nadeem Naqvi, managing director of the PSX told Reuters all interested parties had to submit sealed bids by October 21. “Final outcome will be known by early November,” he was quoted as saying.

Another top official, however, said the PSX could receive additional letters of intent by December. 

“Before March 2017, I think there will be some positive news about the strategic investor,” he told the Nikkei Asian Review in an interview in October. 

Middle East investors had also shown interest in buying the stake. For China, the deal would mean the first-time bourse acquisition beyond its homeland.  

China has already pledged $46 billion investment to improve infrastructure in Pakistan, which is an integral part of the Chinese government’s massive “One Belt, One Road” initiative. 

The deal would also open a floodgate of Chinese private investment into Pakistan.

The stake’s selling price has yet to be set. But, the Nikkei Asian Review calculated the assets of the PSX’s benchmark Karachi Stock Exchange at $134 million as at the end of 2015.

Local shares are trading at an all-time high, helped by an improving economy. The bourse’s market capitalisation from 558 listed companies is $77 billion.

In June, the US equity indices provider Morgan Stanley Capital International decided to include the PSX in its benchmark emerging market index in June 2017, which will bring more foreign portfolio investments into the country.