KARACHI: In Pakistan, Ponzi schemes, scams, and illegal loan apps get more attention than companies at the stock exchange. The country has the world’s fifth-largest population, but its number of investors stand at just a little over 300,000 (including foreigners and corporate companies), according to data available with the National Clearing Company of Pakistan Limited (NCCPL).
Market capitalisation of the Pakistan Stock Exchange is close to $34 billion (as of January 24, 2024’s closing), around 10% of GDP, but nowhere near the value of regional markets either. For context, market cap of India’s market was around $4 trillion in December.
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At the PSX, the number of companies also stands at around 550, with new listings hard to come by. To help in this endeavour, the PSX organised an IPO Summit 2024 over the weekend, as it pitched the case for new companies.
However, Aqeel Karim Dhedhi, a veteran broker and chairman of AKD Group, had a different view.
“Here, laws are made for sponsors, not minority shareholders,” he told Business Recorder in an exclusive interview on the sidelines of the IPO 2024 Summit on Saturday.
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“A lot of (price) changes have occurred in stocks, but they are against minority shareholders.
“If you are a shareholder and you have some complaint against the company and even if you file that complaint, there will be no one to protect the shareholder.”
The veteran stock trader lamented that this is not the case in the rest of the world.
“Companies buy back stock at the valuation (book-value),” he said.
“What happens in Pakistan is that if book value of the company is Rs400 and it is being traded at Rs150, companies buy back to reduce the capital. The beneficiary is almost always the sponsor, not the minority shareholder.
“There is no denying that minority shareholders who want to stay can stay. But people get tired because they do not earn a return on their investment for a very long time. So they just sell their stocks to get rid of them.”
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Dhedhi, also known as AKD, said regulators have improved the functions, but the process needs to continue.
“We are a brokers’ association and regulators should take proposals from us and if we misguide then they should not implement them. But listen to our proposals that are just.”
AKD, also the chief of the brokers’ association, said if minority shareholders’ interest is protected, then the investor-base will increase ten times to 2 million.
“There are a lot of companies which are not performing for years and still running for decades. There should be a law made that if a company doesn’t protect minority shareholders rights for 10 years, then at the 11th year, anyone can take over by buying 10% of the shareholding or can take over the management.”
AKD projected that if minority shareholders are protected, the market cap could touch the value of the overall GDP.
“Market cap will hit $330 billion.”
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