‘No bar on loss-making firms to list on PSX’

ISLAMABAD: The government has permitted loss-making companies to raise capital through listing on the stock exchange – a move that aims at to enhance depth in the tattered equity market, a top official said on Monday.

Khalid Mirza, chairman of the Securities and Exchange Commission of Pakistan (SECP) policy board said the board removed the bar on loss-making companies to be listed on the Pakistan Stock Exchange during a meeting last week.

“The policy board decided in its meeting on Thursday that there should be no bar on loss-making companies being listed on the stock exchange,” Mirza said. “It is up to the company being listed to decide whether it should be on the main board or on the alternate board.”

Previously, there was a ban on listing of companies who were unable to show profit for consecutive three years. SECP board’s chief said the decision would bring depth into the market. “We are liberalising the stock market. It will do well and depth will come in it in days to come.”

The government constituted the SECP policy board with representation from the private sector in November last year. Mirza said the decision taken during the meeting would be implemented.

Overregulation of the PSX has been one of the impediments to bringing depth to the market. The SECP policy board took a series of steps to ease regulations.

“The market did not perform well due to over-regulations despite some positive sentiments over the past several months,” a SECP’s official said, requesting anonymity. “Ease of the regulations would benefit the market.”

Stocks market 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.

Brokerage Topline Research said 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”.

The stock market has been facing troubles since after its peak attained in May 2017 when index hit all-time high of 52,647 points. The political noise was created from ouster of former Prime Minister Nawaz Sharif.

The index shed 8.4 percent or 3,405 points to close at 37,066 points in 2018. Stock market closed on negative note for second consecutive year. Erosion in share values amounted to nearly one trillion rupees.

Analysts feared that the country might lose its emerging market status given by the Morgan Stanley Capital International (MSCI) in May 2017 if its blue-chips continue to derogate from the required free-float standards.

The country’s status will be reviewed in the next annual MSCI review (May-Jun 2019) after which, investors will be allowed a year or so to adjust to the new rule, according to the analysts.