Pakistan Market: Regulators addressing market liquidity – By IMS Research
Pakistan Market: Daily market volumes have averaged 138mn shares CYTD, sharply lower than CY15 average of 247mn shares. To address this, and perhaps with a nod to upcoming MSCI review, local regulators have amended Margin Finance System (MFS), and are seeking to enhance scrip‐level circuit breakers/introduce market halts.
Effective today, NCCPL has (i) enhanced position limits in MFS, (ii) allowed spot financing, (iii) removed margin requirement when financier/financee are same clearing broker and (iv) altered Financing Participation Ratio (FPR) from 25% cash to 10% cash and the rest in form of acceptable securities. Furthermore, the PSX is seeking feedback to (i) gradually enhance existing circuit breakers in tandem with introducing Index Based Market Halts, and (ii) enhance minimum free float.
Improving existing market leverage mechanism and implementing international best practices are, in principle, encouraging steps. NCCPL amendments to MFS, in particular, should lead to immediate improvement in volumes, in our view. However, the proposal to enhance circuit breakers may lead to some increase in risk parameters where PSX aims to balance this through Index halts.
By: InterMarket Securities Private Limited