Home »Stocks and Bonds » Pakistan » SECP reforms boost key fundamentals of capital market
Following the significant reforms introduced by the Securities and Exchange Commission of Pakistan (SECP) aimed at facilitating ease of doing business, efficiency in market operations and reducing over-regulations, the key fundamentals of market started showing significant improvement. The recent measures taken by the SECP have been positively received by the market participants. The recent upward trend in the market is also indicative of improving conditions in the capital market and signals increase in investor confidence and a positive outlook. The KSE 100 index trend also showed improvement since dropping to its lowest point on August 16, 2019 (28,764) and has recovered to 32, 111 on September 20, 2019 reflecting a gain of more than 3400 points (12 percent).

The average daily traded value for last 2 months (August to September 20) have increased to Rs 4 billion after dropping to an average of Rs 2.7 billion for the month of July 2019. Moreover, average market volumes have also improved from 76 million shares in July 2019 to more than 111 million shares in August and 123 million shares in fist twenty days of September. Similar trend can be witnessed in the futures market whereby the average daily traded value increased from Rs 1.9 billion in July 2019 to Rs 2.5 billion in August and September 20.

Trend of foreign investors also shows improvement and the foreign investment during July-August 2019 was at its highest in last five years data for July/ August at more than $104 million.

Some of the major steps taken by the SECP to restore investors confidence include amendments in the PSX regulations relating to reforms in the blank selling reporting in deliverable futures, reducing liquidity margins in the ready market segment, abolishing additional 10 percent margins and haircuts, reducing deposit requirements in the deliverable futures market, resolving practical issues in the CKO system, approval of Morabaha Share Financing product, reform in the Margin Financing product to allow unblocking and pledge of financed shares. In addition, PSX was instructed to make regulations for prescribing minimum brokerage commission. SECP has also approved the regulations for ETF and approved the revised market making regulations to facilitate market making in the ETF and other products.

Moreover, the SECP has also formed a committee of seasoned market professionals to provide suggestions for improving liquidity in the market and address concerns related to ease of doing business and removing practical hurdles. Market participants are expressing satisfaction over the much needed support and demonstration of facilitation by the SECP.

Copyright Business Recorder, 2019

the author