Interview with Muhammad Azam Yousufzai – a Capital Market Expert
[box type=”shadow” align=”” class=”” width=””]Profile:
Muhammad Azam Yousufzai has more than 20 years of experienced within and outside Pakistan, financial sector including Investment Bank, capital market with primary and secondary market activities, Mutual Funds, Equity brokerage (local and international), Block deals & Corporate Finance.
Over the last 10 years, he worked as CEO/Nominee Director of leading brokerage house, provided expert advisory services to equity desk of major institutions (local and international both), Portfolio management, Portfolio advisory of high net worth individuals (local and international), Administrative, Operational, Research, Accounts/finance, Compliances and Sales & Marketing objectives in the financial world of Pakistan. Muhammad Azam Yousufzai started his professional career with international exposure at Mashreq Bank Dubai in a highly professional environment with dedication and commitment. Subsequently contributed his skills in the growth and development of Atlas Investment Bank — a subsidiary of Atlas Group.
Furthermore, he enjoyed rendering his abilities as Chief Operating Officer at Standard Capital Securities Private Limited and brought structural reforms in the institutions and succeeded comfortably with effective exit strategy before the financial crunch of capital market in 2008. Muhammad Azam Yousufzai developed Sunrise a complete brand equipped with diversified expertise of human resource working passionately in this group of companies, which are:
- Sunrise Capital Private Limited
- Sunrise Technologies
- Scube Solutions (Software House)
- Sunrise Sports gear
Muhammad Azam Yousufzai started career with M/s Bhayani Securities Private Limited (formerly Kausar Abbas Bhayani Securities) as Head of Research way back in 2001 and then joined Atlas Investment Bank Limited in Equity Research and Corporate Finance Department as Investment Analyst in 2004, later promoted as a Senior Investment Analyst and Assigned to handle International Corporate Client (JP Morgan Chase & Co) with other Local Corporate Institution like Abamco (Currently JS Investments), PICIC Asset Management, Arif Habib Investments etc. During the period of employment both in Kausar Abbas and Atlas Investment Bank Limited, he enhanced the Company Operations on Equity trading, Research and Corporate Finance. He prepared large number of Analytical reports, Market Commentaries and updates on various sectors in general and leading companies in particular.[/box]
PAGE: Could you tell us about the performance of Pakistan Stock Exchange (PSX) in 2019?
Muhammad Azam Yousufzai: CY 2019 was not lucky for PSX investors like other industries because of cut in GDP growth from 5.5 to 2.5 by the Government of Pakistan, Interest rates almost double from 5.75% to 13.25%, CPI inflation moved from 3.5% to 12.67% and the most important Pak rupee devalued by almost more than 40%. July 25, 2018 was the general election day in Pakistan and at that time the PSX 100 Index was at 42,500 with a market cap of $60 billion but unfortunately after the above mentioned downward developments, the Index shrank to 28,500 levels in August 2019 with a market cap of $42 billion. After August, the PSX started moving upward as in the market most of the shares were oversold and witnessed blank sell with big numbers. The confidence given by Chief of Army Staff to the business community was a boost and the PSX 100 Index once again and marched towards 41,000 level by mid of December 2019 but is still trying to achieve levels where it started 17 months ago.
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PAGE: Could you tell us about the recent developments in the primary and secondary markets?
Muhammad Azam Yousufzai: Financial market in Pakistan consists of (i) Money Market which provides short term funds and (ii) Capital Market which makes long terms funds available to businesses and industries. The Financial market can be reclassified into (i) Primary Market in which new shares are issued and (ii) Secondary Market in which securities previously issued are traded such as Shares and Mutual Funds. Of this, the banking sector and non-banking sector are regulated by the central bank, State Bank of Pakistan. While rest of the market (Lease, Stock Exchanges, Modaraba, Mutual Funds and Insurance) is regulated by the Securities and Exchange Commission of Pakistan (SECP). Unfortunately as per the country economic condition, we did not see any major development in recent past especially since the formation of current government. No such IPO or shares were issued as compared to the past i.e. 2013 to 2018. Expansion is a main cause to issue new shares but in the current circumstances no one either local or international, interested to expand their businesses in Pakistan. Main reason is the current high discount rate which was 5.75% in the previous government tenure then suddenly it jumped to 7.5% in the last caretaker government and currently is at 13.25% with a high inflation number of 12.67%.Why an industrial will go for expansion when his/her production cost will double in 17 months and already it is very difficult competition with the regional markets especially with India, Bangladesh and Sri Lanka.
Pakistan is the only county in the world with the growing interest rates otherwise DR trend is reversing in the universe. As regards the secondary market, Pakistan capital market has never been ideal especially for the international investors as there is a still feeling of control by some big brokers and their nominated people are present in the regulatory body, this is very unfortunate. It’s a $50 billion capital market in which 51% stake is owned by Government of Pakistan but we did not see any major development is the past 30 years. The board of directors and other associates especially the management of Pakistan Stock Exchange was neither interested to increase the size of investors nor introduced any other products as compared to other regional markets. There are still only around 200,000 investors with listed companies of around 575. The size of investors is very limited since very long as compared to Bangladesh which increased the capital market investors to around 4 million in last 30 years.
PAGE: What is your take on the foreign investment in the capital market of Pakistan in a couple of years?
Muhammad Azam Yousufzai: Pakistan capital market is the most attractive in the region as per price earnings ratio PE or dividend yield but after last prime minister of Pakistan Mian Muhammad Nawaz Sharif’s disqualification, we saw a continuous outflow since 2017 till date.
Government of Pakistan is really working hard to stop flight of capital but no one considers this outflow of around $500 million in last six months which is surprising. FATF can help to stop this flight of capital market investors otherwise we can witness major 2 to 3 billion outflow in the coming months because of this high discount rate and devaluation of Pak rupee.
PAGE: Could you tell us the development in PSX in 2019?
Muhammad Azam Yousufzai: There was no major development in the capital market of Pakistan since last year and we have witnessed this zero development since many years as far as new products and options are concerned. The only focus is to develop regulatory frame work which subsequently increases the expenses of exchange including all other regulators like SECP, CDC and NCCPL that’s why some times it feels, Pakistan capital market is overregulated. Need to focus on more products specially derivatives as we have T+2, future market and one very limited leverage window.CY19 was zero gain or performance year for all investors and specially big loss for the Chinese investors who took first 40% than 20% PSX shares at the rate of Rs. 28.75/-.
Almost all indicators are same negative but the confidence given by COAS to big investors and industrialist about regulators specially NAB, FIA, SPB and FBR boost the index once again at 41,500 levels. We hope for the better progress of this current government, no doubt there are lots of challenges faced by this government but as a Pakistani we all wish for successful, secure and progressive Pakistan.