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February 29, 2020

SECP plans new products to lure investment in psx


February 29, 2020

ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) planned to roll out new equity products and simplify capital raising process to expand investor base in the stock exchange, it said on Friday.

SECP, in its annual report, said it planned to introduce exchange traded funds (ETFs) facility, which would trade in the Pakistan Stock Exchange (PSX) much like other securities, to increase number of retail stock investors. Besides, it planned to introduce growth enterprise market listing regulations to enable small and medium enterprises, greenfield projects, not-for-profits and other companies to raise capital through capital markets conveniently.

The commission said only 10 initial public offerings (IPOs) were announced in the past three years. Total two IPOs were issued during the last fiscal year of 2018/19 with Rs5.7 billion raised in funds. The number were four each with Rs4 billion and Rs10 billion fund raising in 2017/18 and 2016/17, respectively.

The SECP said it would pursue requisite regulatory framework and reforms to facilitate market-making framework for ETFs, regulations for share-murabaha financing and equity crowd funding.

“In line with its mandate of investor protection and development of fair and efficient financial market in Pakistan, the SECP shall continue its efforts aimed at strengthening risk management, increasing transparency, reducing systemic risk, improving governance of capital market infrastructure institutions and enhancing investor protection,” the SECP said.

The SECP further said it planned to “critically” review and consolidate the Securities Act 2015 and the Futures Markets Act 2016 to simplify laws and remove redundancies. It will also review rule books of PSX and Pakistan Mercantile Exchange for reforms targeted at ease of doing business, addressing overregulation and removal of practical difficulties.

The SECP said it is also simplifying and revamping the IPO regime to make the process simple, cost effective, and more efficient.

“Besides, in order to support the growth of the industry and promote competition, minimum and maximum limits of brokerage commission shall be prescribed to regularise the erstwhile unregulated areas of the capital market,” it added. “These standardised limits will provide a level-playing field for all market participants and would ensure delivery of quality brokerage services to the investors.”

The SECP said the existing circuit breakers are comparatively narrow and restrictive and might adversely affect pricediscovery and market growth.

“In line with international best practices, market halt shall be instituted on KSE-30 index to give a cooling-off period to the market, prevent irrational price fluctuations and allow brokers to deposit their margins with the clearing house,” it added. “Similarly, circuit breakers on individual scrips shall be expanded in a phased manner from the existing level of 5 percent.”

The commission said the last fiscal year of 2018/19 was overall challenging for the markets. The year initially witnessed a steady decline followed by partial recovery that lost its impact towards the end.

The KSE-100 index began the year at 41,910.90 points and ended at 33,901.58 on June 28, 2019, having recorded a decrease of almost 19 percent. The market touched its lowest level of 32,354.06 on May 20, 2019 and recorded its highest level of 43,638.77 on July 31, 2018. The average daily turnover was 155.205 million shares and 36.8 million shares in ready and futures market, respectively.

A total of 544 companies with accumulated paid-up capital of Rs1,340.2698 billion are listed on PSX as on June 30, 2019 with a market capitalisation of Rs6.8 trillion, reflecting approximately 21 percent decline compared to the last year.

Foreign investment in the stock market exhibited a net outflow of $355.953 million during the year, which reflected a negative 26 percent compared to the last year.

“Despite all the turbulence, settlements have been executed in a timely manner that depicts strength of risk management in capital market,” the commission said.

The commission planned to submit an application for becoming a signatory to International Organization of Securities Commissions’ (IOSCO) enhanced multilateral memorandum of understanding, which would ensure enhanced information sharing and cooperation between IOSCO’s members.

“To further facilitate company registration, we plan to establish business centers in Karachi, Lahore and Islamabad exclusively for company registration services,” the commission said. “Introduction of digital certificate of incorporation, extension of one window facility for company registration to other provinces and integration with FBR (Federal Board of Revenue) for sales tax registration is also on our agenda.”

The SECP said it would endeavor to complete validation process for SECP’s accession to the International Association of Insurance Supervisors’ accord.

The commission planned to revamp the regulatory regime for insurance sector through amendments into Insurance Ordinance 2000, introduce regulatory sandbox for promotion of insurtech companies and microinsurance through digital channels, launch a dedicated microinsurer regime, notify a cybersecurity framework for insurance sector and roll out education insurance schemes.