KARACHI: Pakistan Stock Exchange (PSX) chief executive Farrukh Khan on Tuesday criticized the government for giving disproportionate incentives to the property and construction sectors while discouraging investment in the capital markets.

Speaking at a press conference, Mr Khan said the incentives given to the property and construction sectors amounted to hundreds of billions of rupees as stock market investors are only demanding conditions fair competition at little or no cost to the public purse.

“There are few KYC [know-your-customer] for the national savings and real estate sector. But stock market investors must answer for the wealth of their seven generations,” Khan said.

The PSX chief said the regulatory burden associated with the Financial Action Task Force is also “disproportionately heavier” in capital markets than in the real estate sector. “The PSX is the honest taxpayer whose tax burden gets heavier every year because no one is taxing the undocumented segments of the economy,” he said.

He urged the government to list all public companies on the PSX to bring accountability and transparency to the public sector.

Mr. Khan said that the main reason for the steady decline in the value and volume of trade is the sharp rise in the international price of oil, which invariably leads to a wider trade deficit, a weaker rupee, higher inflation and an increase in the cost of funds for companies.

He demanded that the government at least develop standard operating procedures (SOPs) aimed at assessing the best fundraising route for megaprojects or circular debt settlement.

He argued that raising debt through the PSX will help the government recover funds at a rate lower than that offered by commercial banks.

In her presentation, PSX Business Development Manager Raeda Latif talked about the first and second tranches of Pakistan Energy Sukuk (PES) through which the government raised a total of Rs 400 billion.

Eight banks structured a PES-I of Rs 200 billion at six months Kibor plus 0.8 pc per annum and then listed it on the stock exchange. However, the government issued the PES-II through the PSX, which proceeded with bookbuilding to ensure a competitive rate. The exercise enabled the government to secure a six-month Kibor price minus 10 basis points for the Rs200bn PES-II.

In other words, PSX’s involvement effectively saved the government about Rs 18 billion over the 10-year span, she said.

“The PSX book building system led to competitive price discovery for PES-II and attracted a large number of investors, which would not have been possible if it was a non-competitive process. “, she said.

Posted in Dawn, March 16, 2022