SECP doubles foreigners’ shareholding limit in capital market

KARACHI: The Securities and Exchange Commission of Pakistan (SECP) on Saturday doubled the shareholding limit for foreign individuals and entities in the recently demutualised stocks market, in a major move to encourage foreign inflows.

“The limit of shareholding of PSX shares by foreign persons or institutions has been increased to 20 percent of the total issued share capital of PSX (Pakistan Stock Exchange),” the SECP said in a statement.

Earlier, the limit of shareholding was 10 percent for foreign individuals or entities. The limit was increased under the Stock Exchange (Corporatisation, Demutualistaion, and Integration) Regulation 2012.

In 2016, the PSX sold off 40 percent of its shares to Chinese-led consortium and another 20 percent as free-float through an initial public offering.

The equity market was expecting to rope in approximately $136 million through the divestment of its majority stakes.

Foreign investors, however, remained on their toes throughout the last year as they were net sellers of $534 million worth of shares and were net sellers during 34 consecutive weeks out of 52 weeks, brokerage Topline Securities said in an annual review. Major foreign selling was witnessed in banks amounting to $259 million given decline in profitability of large banks due to pension cost, higher admin costs and higher provisioning.

Exploration and production sector witnessed selling of $139 million primarily due to rupee devaluation while cements sector registered an outflow of $72 million amid

surge in international coal prices and inability to increase cement prices, and power generation and distribution and textile recorded selling of $34 million and $26 million, respectively.

The Securities and Exchange Commission of Pakistan said it is mandatory for foreign individuals to disclose if they have one percent holding of Pakistan Stock Exchange shares or for foreign institutions to disclose if they have 2.5 percent holding of PSX shares.

The Securities and Exchange Commission of Pakistan advised Pakistan Stock Exchange and the Central Depository Company to coordinate on the limit increase and put in place a mechanism and system “that can allow for the said increase in shareholding limit of

PSX shares by foreign persons or institutions”.

Analysts said the new rule is likely to goad foreign investment into the market that emerged as the worst performing investment avenue among all its peers during 2018 as economic and political challenges caused equities to turn up negative returns of five percent during the period.

The market continued to post negative returns for the second consecutive year, posting five percent decline in rupee terms in 2018 versus 15 percent last year, while the decline in dollar terms was 25 percent versus 20 percent.