Let me write my heart out. So please bare with me.
Let’s start with “Why” Stock Markets getting better can solve many of Pakistan’s financial problems.
1. Pakistani government has the biggest share of the capital markets. About $27 billion dollars approximately. It can grow to $100 billion within no time. And $100 billion is exactly what our international debt is. We can pay it all off in one go.
2. It can create about a million jobs in the next five years and add another few billion dollars in taxes collected by the government in the next 5 years. Corporate taxes and the Capital Gains Taxes.
3. We will not have to go to international lenders to borrow money in dollars and pay 7% on a dollar based loans, killing our economy. We will be able to borrow by listing our own Bonds or Sukkuks locally on our exchange and raise the funds in Rupees. No pressure on our currency for decades to come.
4. By giving a chance for local technology companies to list its shares and raise money, we can provide immense opportunities to the “Tech” sector thus growing our IT exports immensely, creating Unicorns whose shares can be used by the companies themselves, as its currency to take over other corporations or to use it to hire the “Brain Drained” talent from overseas who could be lured in not only because of the salaries but “Stock Options”. Thus, not only creating jobs but also contributing to Research & Development in almost all fields, including but not limited to technology field.
Let me just stop at these four benefits. I can list 8 more exactly. But let’s start with the achievable first and then move to the impossible later. But prior to bringing a revolution in the financial markets of Pakistan, let me identify for the first time openly, how bad and manipulated these markets have become. And nobody raises their voice because of two reasons, either they are part of it themselves or have their jobs at stakes as employees.
Manipulation is everywhere in the markets around the world. Loopholes are rampant in every market to take advantage of even on Wall Street. Irregularities take place and I have noticed them in over 26 markets around the world in my 29 years of experience. But never have I seen what I have witnessed in Pakistan. Until we fix the problems we can never achieve the 4 points I have given above for the betterment of Pakistan. Even the good people in the markets become helpless because the system supports the corrupt.
No other field of Pakistan is more corrupt than the Pakistani financial markets. Corruption to people means taking bribes. That is the silliest notion of the definition of the word corrupt. Corruption means taking advantage of a regular person financially and him not being able to do anything about it.
When a regular investor does not have a level playing field against the market movers, then he can never win.
What do some, and I am writing “Some” brokerage houses do causes billion of dollars in corruption a year.
The losers are both the small investors and the foreigners. It kills the faith of investors in our markets. No investments come, government loses in two ways, the taxes that it can collect which can be in billions of dollars a year and the lack of new money entering the markets thus causing state owned shares worth $28 billion not to increase to $100, $200, or even $500 billion dollars in value. NAB has no understanding of the complexities of the crimes in our capital markets, FIA has no expertise. And I do not blame either of them, they were never given any trainings. SECP is “The Problem” itself rather than a solution. The young and the brilliant minds enter the SECP but because of the old and the corrupt leadership, they either have no room to remain honest or they become part of the game of the older ones. I have met some of the most honest people in SECP but they are never given a chance.
Some regulators of the SECP are rumored to have Benaami accounts at the brokerage houses where they themselves make millions per stock hand in hand with the manipulators. Front Running is so rampant that if a foreigner places an order, the trader calls his local clients before executing the orders and runs up the stock. This has killed the confidence of the foreigners in our markets. Research departments are either full of young and the experience less or they write reports, mostly, what the SETH is asking them to. Some Audit firms are so interlinked with the brokerage houses that they leak the earnings weeks before they come out. The cartel at the PSX is so strong that 5 five, literally, 5 of them can move any stock to any price in collusion. Calls are placed to large investors after The SETH has accumulated and cornered the float with shares that he wants to move up. Information is leaked and shared about the client positions like it’s a morning newspaper. Short sales positions’ information is leaked so the short seller can be squeezed into buying his shares back at the highest price, giving guaranteed profit to the ones who created the short squeeze.
If the company is to be delisted from the PSX, news is leaked of its “Review To Delist” weeks if not months in advance. Investigations conducted by the staff against the members are absolutely favored against the lobby that he belongs to. If the SECP Chairman is of one lobby, then all the investigations open up against the friends of the opposing lobbies. And this continues and has been continuing for decades.
Not a single Big Wig is ever punished. Neither from the SECP nor from the Brokerage Industry. If you turn the stones within the SECP, you will find more irregularities than anywhere else in Pakistan.
I have waited to write this article for a very long time. Because nobody else would. I know that. And I can understand why. They may have families to support and that may discourage them to become a target. I have a family to support as well but maybe over the decades I have gained much more confidence to speak the truth or maybe the thoughts of betterment of Pakistan gladly puts me on the Kamikaze mission.
Be it all or some. If we fix our Financial Markets, we can put Pakistan on the road to prosperity. It may not solve all our problems, but we can retire major portion of our external debt. Create jobs. Give confidence to small and foreign investors. Raise hundreds of billions upon billions in Market Capitalization of our Markets. Collect billion of rupees in taxes and the list can go on and on.
I know it can be done. All we need is a willing government. Is the government of Imran Khan that government ? I hope so. This article to me is not even 5% of the problem described and maybe just 2% of the solutions I have given.
Author: Mir Mohammad AliKhan