KARACHI: The Federal Minister for Finance, Revenue & Economic Affairs, Asad Umar has agreed to sympathetically consider the proposals submitted by the board members of the Pakistan Stock Exchange (PSX) during his visit here on Saturday. It was his first visit to PSX after taking office.
During the visit Asad Umar expressed his optimism and offered praise to PSX Board and Management and SECP for introducing reforms in line with best international practices that have ensured that the market can now withstand significant volatility – as seen since May to December 2017 – without any disruption.
The meeting was led by the Chairman of the Board of PSX, Sulaiman Mehdi and was attended by Acting Chairman SECP Tahir Mehmood, Commissioner SMD Shauzaib Ali, PSX Managing Director, Richard Morin, Members of the Board of PSX and leading capital market participants.
The Chairman of the Board welcomed the guest and thanked him for accepting to discuss proposals related to capital market development. The Chairman expressed the view that a vibrant, efficient, world-class capital market is essential for Pakistan to achieve its ambitious economic growth.
During the meeting Chairman PSX highlighted the very attractive valuations on Pakistan’s equity market compared with regional peers. Forward price to earnings multiples of 7.6 x compared to average regional multiple of 13.7x and dividend yield of 6.9 per cent compared to average regional yield of 3.6 per cent presents a good opportunity for investors.
Similarly, Pak-rupee devaluation of 19 per cent in 2018 is part of a global trend that includes 93 per cent devaluation in Argentina, 50 per cent in Turkey and 15 per cent in India. This realignment of our currency sets the stage for increased foreign investment in Pakistan. In the past, our market has shown the ability to attract significant foreign interest, including one billion US dollar in two secondary public offering of UBL and HBL in 2014-15.
The Chairman of PSX presented proposals to the minister to align capital gains tax between stocks and real estate to ensure a level playing field. It was also proposed to allow carry-over of capital losses for up to 3-year, reintroduce the concept of holding companies tax structure for inter corporate dividends to avoid double taxation and reduce the advance tax rate from 0.02% to 0.01% on stock exchange transactions.
All participants also proposed to remove the embargo on foreign holdings of PSX shares. Other proposals put forth include setting up a fund to divest government holdings in State Owned Enterprises which would be available to the Pakistani diaspora and foreign investors. On the Debt side the concept of issuing USD linked PKR bonds for domestic investors was also appreciated.
Chairman PSX requested Honorable Minister to update participants on government strategy to deal with fiscal and current account deficits. The Finance Minister informed that in addition to the IMF program currently under discussion, government is making continuous efforts to obtain support from the Governments of friendly countries. He also highlighted the fact that this Government has acted very diligently to adopt measures that will add one thousand billion rupees annually in government revenue to reduce the fiscal deficit.
SECP agreed to consider several initiatives proposed during the meeting, including a review of current restrictions on Negotiated Deals Market between clients of the same broker, increasing the number of scrips eligible as well as position limits for futures market, reviewing buy back regulations to make it easier for companies and introducing more flexibility for Employee Contributory Funds to invest in the stock market. To attract more companies to list on PSX, Acting Chairman of SECP, Tahir Mahmood also ensured SECP’s commitment towards reviewing the regulatory framework for listed companies in consultation with PSX.
In closing, the Chairman, the MD, PSX Board Members and other participants thanked the Minister for his support and expressed great optimism and full confidence in his leadership to lead Pakistan through its current challenges.