Pakistan Stock Exchange’s Managing Director Mr. Nadeem Naqvi said on Monday that the bourse could see initial public offerings (IPO) for power sector projects of around $1 billion in 2017 and 2018.
He also opined that Pakistan could regain its stock index emerging market status again by this year.
“The projects that have had financial close and are under construction now, the tendency is that – once they get commissioned – that is the time they come onto the market to restructure their debt-equity ratio, so about $1 billion will come in.” – Nadeem Naqvi
Reclassification
In March this year, index provider MSCI said that it was looking for feedback from investors about moving Pakistan stocks to emerging market status from frontier market status, with more risky and less liquid stocks.
Pakistan was removed from emerging market status in 2008 given its economic conditions at the time. The decision to move it back to emerging market status is now due in June 2016.
Investment prospects for Pakistan
Mr. Nadeem expects to see money coming from abroad in anticipation of the decision, and he thinks that Pakistan will regain the emerging market status in December, if not in June.
“We saw that in the case of Qatar or the United Arab Emirates, approximately $400 million came in within 6-8 months of the announcement, and the market there is relatively narrow, Our market is much more broader, but given Pakistan’s risk factor, I will be very happy if we get about $200-250 million to come in – now this would be the initial arbitragers which would position themselves for the index flows.” – Mr. Nadeem
The Current State of Pakistan Stock Exchange
About 30% of the freefloat listings in Pakistan’s stock exchange is held by international investors, a number which is expected to rise once Pakistan is reclassified. Mr. Naqvi also said that he expects market capitalization to rise above $100 billion by the next five years.
He further commented that “Anywhere between 40-45 percent (of foreign ownership) would be a number I would be comfortable with, anything beyond that it becomes risky because the volatility will increase.Pakistan’s discount against emerging markets is huge, and I think we will be seeing a narrowing of that discount, so even though the global valuations are not going to expand, Pakistan’s discount is going to narrow, and there we are going to see that in the market cap.”
