ISLAMABAD: A recent analysis reveals that approximately 65 percent of retail investors in the Pakistan Stock Exchange (PSX) originate from small cities and towns. This demonstrates an increase in the penetration of stockbrokers throughout the country due to relaxed regulations. However, experts argue that the government must ensure a level playing field for the stock market to thrive.
Farrukh H. Khan, CEO and Managing Director of the Pakistan Stock Exchange Limited (PSX), highlighted the positive impact of recent measures that have started to yield results. These measures have not only attracted small investors but also increased the participation of small brokers.
“In the past, participation in the stock market by small investors was predominantly dominated by individuals from Karachi, Lahore, and Islamabad,” stated Mr. Khan.
He pointed out the steps taken by the PSX and the Securities and Exchange Commission of Pakistan (SECP) to facilitate investors. These measures include easy online account opening from any location within the country. Additionally, in collaboration with the State Bank, banks now share the Know Your Customer (KYC) information with brokers, eliminating the need for repetitive KYC processes for brokers and investors.
Furthermore, the introduction of the “Sahulat Account” has proven to be a game-changer for investors looking to open accounts with investments up to Rs 1 million. Approximately 40% of new investors have registered under this category.
Khan expressed optimism that with the improvement of macro-economic indicators, the stock market will stabilize, benefiting individuals with small investments in the market.
However, Mr. Khan emphasized that the stock exchange does not seek subsidies or relief from the government. Instead, they request a level playing field that is comparable to other asset classes, particularly real estate.
“The tax treatment for different asset classes should be the same. This would not only benefit the stock market but also the overall economy of the country.” asserted Mr. Khan. “Investors should have the freedom to choose sectors that offer higher returns, and this should not be influenced by tax policies.”
He further highlighted that a significant amount of resources are invested in real estate, which receives limited tax collections. On the other hand, the stock market is one of the most documented sectors in the country, ensuring compliance with tax regulations. Encouraging investment in listed companies and reducing taxes for individual investors can promote saving and investment practices, contributing to higher tax collections.
He concluded by urging the government to reduce tax rates for listed companies in comparison to non-listed companies, further incentivising investment in the stock market and facilitating the growth of the capital market.
Â
