Chinese cos buy stake in Pak bourse

Beijing: A consortium of Chinese companies has bought a 40% stake in

Pakistan Stock Exchange

(

PSX

) for $85 million. This is perhaps the first big price that Pakistan is being asked to pay in return for Chinese investments in the China-Pakistan Economic Corridor, which is expected to cost $46 billion.

The consortium, including three bourses China Financial Futures Exchange, Shanghai Stock Exchange and Shenzhen Stock Exchange, picked up a 30% stake in PSX. The other members of the consortium, Pak-China Investment Co and Habib Bank, bought 5% each. PSX sources had said a British consortium, along with local banks, was also in the fray.

This is the first time the Chinese companies have acquired stakes in a foreign stock exchange. A consortium of Chinese companies has been trying to acquire the Chicago Stock Exchange for nearly a year but it is facing resistance from a group of US senators. China is now trying to connect the Shanghai stock exchange with the one in London. It has recently connected the Shanghai exchange with those in Hong Kong and Shenzhen.

The China Securities Regulatory Commission has made it clear that it supports the acquisition, and expressed the hope that the risks involved are within limits. “This investment will help broadening economic and financial collaboration between China and Pakistan and will help implement the Belt and Road Initiative and the China-Pakistan Economic Corridor,” the Shanghai Stock Exchange said.

PSX expects that the investment will bring experience, technological assistance and new products, according to a report in Dawn, a Pakistani news outlet quoting a PSX official. “After Chinese capital flows into the Pakistan’s bourse, the market will be more internationalised and capital that flows into the country will likely to benefit the local economy and enterprises,” Liang Haiming, chief economist with Guangzhou-based China iValley Research Institute, said in an article in the Global Times.

The PSX was set up in January 2016 when the Lahore, Karachi and Islamabad stock exchanges consolidated into one bourse. PSX was included in the emerging market index of the Morgan Stanley Capital International in June last year. “Pakistan’s market reform has been accelerating in recent years and the country has received backing from global institutions and overseas capital, making PSX more appealing to global investors than before,” Bao Kaijun, an analyst with Shanghai-based Kunyuan Investment Advising Services, told the Chinese media. The media also quoted Zhang Wenlang, an analyst with Everbright Securities, saying that there will be more collaborations between Chinese financial institutions and overseas ones.