Pakistan Bourse in Stake Sale Talks With Two Exchanges, CEO Says

Pakistan’s biggest stock exchange, home to Asia’s best-performing equity market in the last three years, has started talks with two bourses to sell a strategic stake before a planned initial public offering.

Two additional exchanges have indicated verbal interest in a deal, Nadeem Naqvi, managing director and chief executive officer at the Karachi Stock Exchange, said in an e-mailed interview, without identifying the bourses.

The Karachi Stock Exchange plans to sell a 40 percent stake to a strategic partner and another 20 percent to the public through the IPO. Stockbroker members will hold the remaining stake.

The stake sale talks come more than a year after the KSE hired Deutsche Bank AG to find a strategic investor. The benchmark KSE 100 Index jumped 27 percent in 2014, taking its three-year rally to 183 percent, after Prime Minister Nawaz Sharif survived an opposition bid to oust him and corporate profits rose.

Naqvi had said in November 2013 that the bourse plans to sell a stake to another exchange, clearing house or depository by September 2014. The KSE will consider strategic investors with at least $200 million of capital and a minimum track record of five years, he said.

The KSE’s net income jumped to 180 million rupees ($1.8 million) in the year ended June 2014 from 121 million rupees the previous year, according to its annual report. Its revenue increased to 1.18 billion rupees from 878 million rupees.

Cheapest Market

The KSE 100 is the cheapest among the main indexes in 16 Asian markets tracked by Bloomberg. The $77 billion market’s benchmark gauge is valued at 8.3 times its estimated earnings for next year, compared with the MSCI Emerging Markets Index’s multiple of 10.8 times.

The exchange this year also plans to introduce exchange-traded funds, real estate investment trusts, and a small-and-medium enterprise segment to encourage new businesses to access funding, Naqvi said. A proposal to make the listing requirements easier for small companies is awaiting approval by the Securities & Exchange Commission of Pakistan, he said.

Overseas investors bought a net $207 million of Pakistan shares in the five months ended Nov. 30, compared with $9.5 million a year ago, according to the central bank.

Before it's here, it's on the Bloomberg Terminal.