KARACHI: Securities and Exchange Commission of Pakistan (SECP) Chairman Akif Saeed said on Thursday all stakeholders should work towards improving the stock market’s liquidity — a capital-market jargon that refers to the ease and efficiency with which a stock can be bought, sold or converted into cash.

Addressing a gong ceremony at the Pakistan Stock Exchange (PSX) to mark the listing of JS Global Banking Sector Exchange-Traded Fund (JSGB-ETF), the chief regulator of the corporate sector urged companies to increase their public float — which consists of shares that can be easily traded on the exchange by retail investors — to ensure greater participation from the general public.

He announced the SECP’s sandbox programme — a tailored regulatory environment that allows businesses to test new products under close supervision for a limited period — will now be open throughout the year for the submission of innovative ideas.

The JSGB-ETF is the eighth ETF listed on the national bourse. A basket of companies that is traded on an exchange like a single stock, the latest ETF is also the first fund launched by a local brokerage house. Only asset management companies were allowed until now to launch innovative product.

ETFs let investors take exposure to a wide range of stocks at once and without having to conduct company-specific research. In other words, the retail value of an ETF “unit” reflects the cumulative performance of several underlying securities.

The new ETF, which consists of eight stocks from the banking sector, has been launched under the SECP’s Sandbox Guidelines 2019.

Speaking to Dawn, JS Global Capital CEO Imtiaz Gadar said the awareness about ETFs among investors is “very low” as opposed to traditional trading products like shares and bonds.

Even though the number of ETFs listed worldwide is nearly 9,000 with assets under management of nearly $10 trillion, their uptake has been slow in Pakistan. The first ETF was launched in 2020 and their total number is still in single digits three years on. Locally listed ETFs attract low volumes that range from 500 units to 2,000 units on most days.

“The listed banking space has proven to be resilient to the ongoing macro challenges. The (banking) sector has consistently reported not only robust profitability growth but also maintained attractive dividend yields,” said Mr Gadar while explaining the reason for launching a banking sector-specific ETF.

A sector-specific ETF lets an ordinary investor buy units in a single fund and expect the value of their investment to move in tandem with the collective performance by the basket of underlying shares.

“The market capitalisation of the (banking) sector trades at attractive multiples and offers immense upside for potential capital gains,” he added.

Published in Dawn, September 15th, 2023