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The following is the full text of federal minister for finance, revenue and economic affairs Dr Shamshad Akhtar’s speech that she delivered at PSX IPO Summit through a video link from Islamabad:


• Restoring confidence in the economy and markets in the past few months has been very rewarding: the Government and market leaders have availed this opportunity to build on past policy and institutional reforms of stock market capitalization.

• Despite challenges, there has been significant progress in macroeconomic, exchange rate, and financial stability. Growth is to rebound to a positive trajectory in the range of 2-2.5% with agriculture expected to grow by 5.6% and industry by 2.5% this fiscal year.

• Strong revenue performance in the first half of the year and rationalization of federal spending have generated a primary surplus.

• The substantial deficit in the current account has turned into a surplus. With the realization of the quick disbursements of multilateral flows and the release of the SBA second tranche, the SBP FX reserves have doubled to $ 9 billion from the lows of $ 4.5 billion in June 2023.

• All efforts have been underway to rationalize the pricing structure of utilities and improve cost recovery through among others control of theft. Foundations have been laid to attract foreign direct investments that will pay high dividends.

• The economic recovery process has bolstered business confidence and market sentiment. PSX index has exhibited a bullish momentum over the last five months of 2023 by more than 50%. Foreign portfolio investors’ inflows increased.

First, a word on Global Markets and IPO trends

• The post-pandemic era has witnessed a tectonic shift in the IPO landscape. While 2021 thrived on record-breaking activity, 2023 saw a recalibration, with deal volume slipping and proceeds shrinking.

• Record high inflation and the calibrated global central bank response have led to significant tightening of the global liquidity conditions.

• For years, the North American IPO scene dominated, but the tide is turning. Asia Pacific now reigns supreme, accounting for over half the global deals and nearly half the proceeds. China, Japan, and Southeast Asia lead the charge, fueled by tech-driven innovation and burgeoning investor interest.

• While technology once ruled the IPO roost, new challengers are emerging. Healthcare, consumer staples, and renewable energy are attracting investor attention, reflecting changing priorities and market dynamics.

• Environmental, social, and governance (ESG) factors are no longer afterthoughts but dealmakers. Investors increasingly seek companies aligned with sustainable practices, creating opportunities for businesses showcasing strong ESG commitments.

• While mega-IPOs once captured the headlines, smaller companies are finding their footing. Micro-cap and nano-cap offerings are gaining traction, catering to niche markets and attracting specialized investors.

• Regulatory waters are constantly in flux. New accounting standards, stricter listing requirements, and increased scrutiny on data privacy can impact IPO timelines and valuations. Adaptability and a proactive approach are key to navigating these regulatory currents.

Second, now a word on PSX and IPO trends

• In 1HCY2023, KSE 100 index went up only by 3%, in Rupee terms, and 19% down in USD terms. However, with the interim setup’s tough yet necessary reforms, the same index, in 2nd Half of 2023, witnessed around 50% return in both USD and Rupee terms.

• The true potential of the stock market can only be realized when we enhance the retail investor base. Though we have increased accessibility to electronic transactions through telco-banking models, active retail PSX investors have remained around 2 lakhs only.

• Among various measures to increase the appeal for retail investors, IPOs play an imperative role. But, due to challenging times on the economic front, the PSX only witnessed a single IPO in 2023, which too was able to raise only Rs 435mn, the lowest in last 15 years of PSX.

• The prudent approach to monetary and fiscal policies, despite pressures, has boosted market sentiments. This is reflected in the market yields, with the benchmark lending rate (6-month KIBOR) down from a peak of nearly 25 percent in September 2023 to less than 21 percent, almost at one-year low, whereas T-bill yield fell below policy rates in the last auction.

Third, important

• Other positive factors like tapering inflation, a surplus in the balance of payments, higher remittances, and successful execution of the IMF program, all of which would pave the way to set the economy on the right path which would eventually transpire into stock market performance.

• We have raised the bar through the issuance of Ijarah-Sukuk, the maiden auction in PSX history, which was oversubscribed 16 times. That was not just a government achievement, but a milestone achieved through the collaboration of all stakeholders to achieve mutually beneficial milestones with a win-win situation for both borrowers as well as investors. We have notified the quarterly auction calendar for the primary auction if the Ijarah Sukuk to be held through PSX.

• Concerning the IPO process, we have supported considerable market improvements like e-IPO provision, and fast-tracking approvals through new shorter processing – 14-day limit for granting regulatory approvals coupled with 15-day window for PSX to complete the entire post-approval procedure.

• The positive ripple effects of IPO will bolster investments in the economy, raise the number of new investors, foster jobs, and promote sustainable growth. The success of our IPOs resonates not only within our borders but also on the global stage, elevating Pakistan’s standards in the international financial markets.

• I look forward to learning from our colleagues and experts on the technical and marketing dynamics of IPO domestic and international players. We understand that lower cost and availability of capital are essential considerations to raise funding on competitive terms.

• Going forward post-election, we would be keen to work with the private sector to get government support for similar initiatives and issuance of IPOs down the lane. Stock markets are a relatively cheaper avenue to raise capital than usual bank financing.

• Also, my definition of IPO is not restricted to equity securities, I also like to see all stakeholders come together for the facilitation of corporate debt securities issuance through PSX instead of privately placed TFCs.

• I am perplexed why our local household brands like Shaan and Dalda, among many others, are still off the PSX counter. In the 5th most populous country, an index with a few hundred companies on the stock exchange is not justified, as no nation has achieved economic prosperity in modern times which doesn’t have dynamic issuers and capital markets.

• We have already taken and are pursuing major steps to address circular debt which has piled up to around 2.6 trn because of past practices and planning. These measures would pave the way to attract E&P related companies for listing.

Copyright Business Recorder, 2024

Dr. Shamshad Akhtar

The writer is currently the Minister for Finance, Revenue and Economic Affairs


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