Pakistan Stock Exchange is facing challenges. Why the new generation stays away? In recent years, the Pakistan Stock Exchange (PSX) has struggled to capture the interest of the new generation. According to IBA research report 2018, Sri Lanka has 700,000 active investors in a population of 20 million while Pakistan only has around 250,000 investors. Similarly, Bangladesh has 2.5 million investors in their stock market and Vietnam with a population of 90 million has 6 million retail investors in the capital market, leaving many puzzled about the root causes of this disengagement.
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Several factors contribute to this situation, including political and economic instability, concerns about corruption and insider trading, and challenging interactions with brokerage firms. These hurdles are further compounded by high Capital Gains Tax and comparative market capitalization concerns. To revitalize the PSX and encourage greater participation, it is crucial to address these issues and streamline the process of entering the market according to a research paper by IBA on the plight of retail investors in the Pakistani Stock Market.
Corruption and insider trading are two persistent issues that can undermine the integrity of the stock exchange. These problems erode trust in the market, making it less appealing to potential investors. When the integrity of the market is in question, investors, especially new ones, are hesitant to participate. Stricter regulations and transparent enforcement are necessary to combat these challenges and restore faith in the PSX.
The SECP received numerous complaints against the YS regarding non-payment of funds, non-transfer of shares and closure of its offices without any notice to the LSE. The governing board of directors of the LSE suspended the trading rights of the YS on April 9, 2012.
Pakistan’s stock market capitalization lags behind other countries in the region, such as Bangladesh. Bangladesh’s Dhaka Stock Exchange, for instance, boasts a market capitalization of $72.1 billion, while Pakistan’s market capitalization is a mere $22 billion. To compete effectively on a global scale, Pakistan’s stock market must grow and mature. A more attractive regulatory environment, reduced bureaucracy, and a dynamic market can help bridge this gap. If Pakistan’s stock market grows and thrives, it can potentially become a magnet for investors.
To revitalize the PSX and encourage more participation, we recommend several concrete steps:
Lowering the Capital Gain Tax to a more competitive level. A more reasonable tax rate would make investing in the PSX more attractive.
Simplifying and streamlining brokerage firms’ procedures. Brokerage firms should provide comprehensive information in a user-friendly manner, simplifying the onboarding process for clients.
Launching awareness campaigns through television and other mediums. Informative campaigns can help educate the public about the opportunities and benefits of investing in the stock market.
Ensuring that Know Your Customer (KYC) processes are more straightforward and less cumbersome. KYC procedures should be streamlined and made more accessible to potential investors, reducing the barriers to entry.
In conclusion, while the Pakistan Stock Exchange faces multiple challenges, it holds great potential for growth and prosperity, In Pakistan Stock Exchange has a lot of disinformation through which corruption and big shark benefit disinformation another name is inside trading; if Pakistan wants NO Corruption then first provides full information about company to the intra-day trader and retail investor.
“JamaPunji” is a good way through awareness provided launched and managed by the Securities and Exchange Commission of Pakistan (SECP), to educate interested investors. (Securities and Exchange Commission of Pakistan SECP, 2018). The website includes a stock trading simulator and explains the different types of investments that can be made in the stock market.
Approximately two dozen people who expressed interest in the stock market were asked if they were aware of this platform’s existence, yet none of the interviewees said yes. The only group that knew of the platform was people who were already traders. By addressing these issues head-on and implementing the proposed strategies, we can pave the way for a brighter and more inclusive future for Pakistan’s stock market.
Encouraging more domestic investment can lead to increased foreign direct investment and economic stability. It is time to take the necessary steps to attract the new generation and ensure that the PSX thrives in the years to come.
By addressing these issues, Pakistan can position itself as a more attractive and dynamic market for both domestic and foreign investors, thereby contributing to the economic growth and development of the country.