Chinese to join bourse board on Feb 10; funds to be transferred in March

PSX’s $85mln strategic sale

KARACHI: Four members, representing the Chinese-led investors of the Pakistan Stock Exchange (PSX), are expected to join the bourse’s board during the next month after a formal signing of the sales-purchase agreement, an official said on Tuesday.  

“A letter of acceptance has already been issued to the Chinese,” Shahzad Chamdia, chairman at the PSX Divestment Committee said. “A formal SPA (sales-purchase agreement) signing ceremony will be held on January 20 and the management control will be transferred through the board.” 

Chamdia added that four members, representing Chinese consortium, would join the PSX board on February 10.

In December last year, PSX sold 40 percent strategic shares to a Chinese-led investors group that made the highest bid of Rs28/share for 320 million offered shares. The transaction value was calculated at around $85 million.

Sources said the funds are yet to be transferred to the brokers. “The inflows are expected in March,” said a source, close to the development. 

The consortium comprises of three Chinese exchanges — China Financial Futures Exchange Company Limited (lead bidder), Shanghai Stock Exchange and Shenzhen Stock Exchange.

Together they will take up 30 percent of the strategic stock, while two local financial institutions, namely Pak-China Investment Company Limited and Habib Bank Limited would acquire five percent stake each.

The bourse acquisition is first of its kind in the regional market, while Chinese bourses stroke the maiden deal outside China.

Besides 40 percent, another 20 percent of the PSX stake would be offered to public to bring liquidity into the capital market through brokers. 

The new manager is expected to launch new products, such as options and weekly derivatives, bring technological improvements, improve PSX perception and introduce cross listings.

The country’s equity market remained resilient despite foreign outflows in 2016. A total of 38.3 percent return was recorded during the year.

The sell-off is seen as the next big event after the Morgan Stanley Capital International (MSCI) Inc. announced, earlier in 2016, to re-award the emerging markets status to the Pakistan’s equity market.

The country will be reclassified into the MSCI Emerging Market Index in May 2017. This upgrade is expected to attract more than $400 million of fresh foreign investment as the index is tracked by the Funds with assets worth $1.5 trillion.