Risk profile of stocks to stay depressed by end of 2023

• Suggests overseas Pakistan to use great RDA facility but do not expect returns into dollar denomination
• Gov rigorous tax regime is detrimental to the development of investor base at PSE

Interview with Sani-e-Mehmood Khan — Chief Executive Officer, Securities Exchange Management Suite

[box type=”shadow” align=”” class=”” width=””]Profile:

Mr. Sani-e-Mehmood Khan has over 27 years of management experience in Capital Markets, IT, Regulation Development, Controls and Fund Management. He is presently serving as the CEO of Financial Technology Company and a Capital Market Consulting Company. He is also serving on the Advisory Board of Pakistan’s eminent think tank, Islamabad Policy Institute, and is a Member of Institute of Financial Markets, Pakistan. He is the founding member and director of Pakistan’s first ever Society of Technical Analysts of Pakistan. PSX first-ever online Risk Management System, Exchange Traded Funds, Market Making, Cash Settled Futures, Stock Index Future Contracts and Options are on his credit. He setup the first ever Information Security function, & introduced QA/CM based PDLC at PSX.[/box]

PAGE: What is your perspective on the investment made in the stock market vis-a-vis gold and real estate?

Sani-e-Mehmood Khan: The risk profile of stocks has gone up and shall remain depressed until the end of 2023, when world is accustomed and inured to the psyche of “COVID variant by each now and then”. The Technology, Pharma and Consumable/Service Sector Stocks are more likely to remain in vogue, while petroleum sector stocks are bound to remain depressed by 2023. Price appreciation trend in gold suggests that global financial systems are up for a disaster. In case of Pakistan, investment in property is going to remain a viable option, and within property, it is advisable to consider investing into property which is far from downtime. COVID has given birth to the idea of work-from-home which means, now people would want to live at a sedative place which is in outskirts of the mega cities.

PAGE: How would you comment on the investment made by the overseas Pakistanis?

Sani-e-Mehmood Khan: The Pakistanis who are sending money through Roshan Digital Account (RDA) with the prospect of dollar denominated return of 7% are risking their expectations. It is my view that economic challenges are such that these deposits shall be redeemed into PKRs only. Overseas Pakistanis send over and above 20 billion dollars on YoY basis, the ease of convenience of RDA and its application had potential of the tune that it was pointless to make high-ended commitments which are expected to be met with surprise in the futures. My advice to the overseas Pakistanis will be to use this great facility of RDA for remittances only without any expectations of dollar denominated returns in the longer run.

PAGE: Your views on investment in Pakistan Stock Exchange in the wake of the incentives given by GoP?

Sani-e-Mehmood Khan: Those who beg and those who in the business of giving and taking incentives in the name of Market Development are the naïve(s) of superlative degree, that’s all. By doing so, they accept their utter failure to transform the stock market into a meaningful investment avenue. Instead of being a home to Savers and Issuers, Pakistan Stock Exchange is a drawing board for the Government to paint a gloomy picture of economy, irrationally.

PAGE: What is your take on the taxes on transaction and holding of securities for payouts?

Sani-e-Mehmood Khan: Relaxation in CGT has proven that stock market is least participated by the savers these days, and government’s choice to side with few thousand individuals. Government has a rigorous tax regime which is detrimental to the development of investor base at Pakistan Stock Exchange. The Government in conjunction with PSX has enforced a policy whereby long-term investors are taxed @ 15% and income from day-trading (SATTA) is taxed @ 12.5%. Pakistan is the only Market in the world which is promoting speculative activity by every possible mean, which is why, BBC in one of its investigative report made trenchant remarks that “PSX is being run like a CASIO”.

By imposing a 15% tax on dividend income, the Government and PSX administration saying by all means to investors, not to indulge in the investment business, just do buying and selling, we have MTS, MFS, and 90 days DFMs, and we will never ever introduce investor savvy and investors’ risk management products like Equity and Index Options.