Government and PSX collaborate to unlock capital market potential

KARACHI, December 24, 2024: In a significant meeting at the Pakistan Stock Exchange (PSX), Khurram Schehzad, Advisor to the Finance Minister, convened with PSX CEO Farrukh Sabzwari and senior management to discuss transformative strategies aimed at enhancing the depth and performance of Pakistan’s capital markets. This gathering comes at a crucial time as the nation seeks to unlock the full potential of its financial sector.

During the meeting, Sabzwari presented an extensive overview of PSX’s strategic initiatives designed to navigate existing challenges while maximizing the vast opportunities embedded within the capital markets. He expressed optimism that a robustly devised strategy could not only elevate PSX’s capabilities but significantly bolster Pakistan’s economic landscape.

Schehzad reiterated the government’s unwavering commitment to fostering capital market growth, acknowledging its pivotal role in stabilising and energising the national economy. He emphasised the need for actionable recommendations, particularly regarding structural reforms and the privatization of State-Owned Enterprises (SOEs), to align governmental objectives with enhanced market capitalisation.

In a forward-thinking move, Mr. Schehzad proposed the rebranding and repositioning of the Growth Enterprise Market (GEM) board to serve as a dedicated platform for venture capital and startup fundraising.

The meeting highlighted several ambitious initiatives set to enhance the capital market’s attractiveness, which included:

1. High-Value Public Listings: Taking definitive steps to encourage high-value public listings, aimed at increasing market capitalization and attracting substantial foreign investment.

2. Expanding the Investor Base: Setting a bold target to elevate the national investor base to 2% of the population within three years, with active engagement from brokers and mutual funds.

3. New Investment Products: Introducing innovative financial instruments, including Exchange-Traded Funds (ETFs), options markets, and derivatives, to further engage a diverse investor clientele.

4. Modern Trading Strategies: Investigating algorithmic trading and robo-advisory services, informed by successful models from markets such as China, to modernize trading practices.

The advisor stressed the importance of collaboration between PSX and the Securities and Exchange Commission of Pakistan (SECP) in developing a comprehensive roadmap. This strategic framework is geared towards increasing Pakistan’s representation in the MSCI Frontier Markets index, with an ultimate goal of gaining inclusion in the more advanced MSCI Emerging Markets index.

To ensure effective implementation and oversight of these initiatives, he supported the formation of a formal committee comprising representatives from PSX, SECP, and the State Bank of Pakistan (SBP).

This collaborative effort is designed to harness the unique strengths of each entity, promote financial inclusion, enhance public awareness, and facilitate seamless digitization within the capital markets.

Celebrating recent advancements, he also commended the relaunch of cash-settled futures as a pivotal milestone in developing the derivatives market in Pakistan, as well as highlighted the importance of establishing collaborative ties with Chinese capital markets to facilitate cross-border investments and broaden market access.