WHAT seemed some years ago to be a pipedream appears to be slowly turning into a reality. For years, the country’s capital market regulators have continued to express profound desire for promoting cross border listing of securities with bourses in the region and beyond.

Although series of meetings have taken place over the years between the regulators, brokers and investors of the Pakistan capital market and their counterparts in markets such as the Colombo Stock Exchange, Dubai Financial Market and others for CBL (cross border listing), nothing substantial has come to pass.

Yet, the interest of Pakistani capital market participants has continued to be focused on India. As early as in Feb 2005, regulators in Pakistan and India discussed CBL at a seminar in Mumbai.

Thereafter, several delegations of stock brokers have visited Mumbai Stock Exchange in an attempt to explore the possibility but received as cool a response as ice. And the money managers on the Indian side have an abundantly understandable reason.

Amit Sharma Dalal, a stock trader in Bombay Stock Exchange (BSE) via a text message explained: “While relationships on trade and industry are growing between our two countries, cross border listing of securities looks distant because of non- availability of enough research on companies listed in other countries of the region”.

The chairman Securities and Exchange Commission of Pakistan (SECP) Mr. Muhammad Ali, in reply to queries told Dawn that discussions were taking place between the KSE and the BSE for the listing of KSE-100 index on the BSE and the BSE Sensex-30 Index on KSE.

He expected a Memorandum of Understanding (MoU) to be signed soon. The apex regulator said that if the indices started trading on the stock exchanges of the two countries, it would create awareness across the border about the existing investment opportunities and the available areas of investment which was vital for investors on both sides.

He pointed out that in case of trading in indices there would be no currency flow. For cross border listing of securities, the SECP chairman said there was a need to revisit the foreign exchange control regime.

“The country’s capital markets have to create depth and buoyancy; they need to increase number of investor base, attract Initial Public Offerings, raise volume of trading and produce quality research material” Mr.Muhammad Ali said.

Former chairman KSE, Arif Habib aired similar views.

He affirmed that that it would be of great benefit if listed companies could manage to access capital beyond geographical boundaries.

But to realise the dream of CBL, it would be essential to provide legal and regulatory “enabling environment”. “Laws need be amended to make the climate investment friendly”, he said.

The Central Banks have to play their part in facilitating cross border banking transactions and liberalise foreign currency flows.

As the Pakistani banks are gearing up to establish branches in India, it is all the more important to act quickly in removing those road blocks.

Head of research at AKD Securities, Raza Jafri admitted that quality and scope of research on companies needs to be improved and said that due to low free-float of stocks, analysts generally follow no more than 50 of the 575 KSE-quoted companies. A more extensive research could improve ‘visibility’ so that the Indian fund managers may be able to get clearer risk perception and allocate funds for investment in Pakistan markets, when CBL begins to take shape.

The Pakistani banks are making first foray in the Indian markets. The UBL and the NBP have already received a nod from the State Bank of Pakistan. A senior banker said: “For banks to enter Indian market and possibly later listings, fund raising is not a single motive. They also want to increase their international presence, together with widening the geographic base of their depositors and shareholders”.

On the other hand banks and companies that list abroad also make useful foreign contacts and interact with foreign consumers and competitors and that, in turn, can help them boost their foreign sales and market share, affirms this banker.

Early this month, India overturned a ban on foreign investment from Pakistan in a move aimed at building goodwill amid a renewed push for peace. The decision to accept foreign direct investment from Pakistan was taken in April when the trade ministers of the two countries met in New Delhi. The improved relations between the rivals stemmed from Pakistan’s decision to grant India ‘most favoured nation (MFN)’ status by the end of the year.

Pakistan has long since opened up its doors for 100 per cent ownership of businesses by foreigners and allowing them repatriation of capital and profit. The Pakistani entrepreneurs hope that the Reserve Bank of India would also remove the Pakistan-specific regulation of a bar on Indian companies’ investment in Pakistan.

“The Indian decision to lift ban on foreign direct investment (FDI) by Pakistani companies in India, raises hopes that it would be a prelude to an eventual foreign portfolio investment (FPI) into each other’s capital markets”, said a market participant and he chirruped: “Cross border listing is much better alternative to cross border firing to which the two countries have been accustomed over the last 65 years.”

While the Pakistani investors are vying for CBL with BSE, there is no visible enthusiasm on Dalal Street, the Indian equivalent to US’s Wall Street. The Indian market is much too big.

A few indications would prove the point: BSE is the oldest in Asia with market capitalisation at $one trillion, making it the 14th largest stock exchange in the world.

The BSE has the greatest number of listed companies in the world, at over 5,000. On the last trading day this week (Aug 9), the market capitalisation of biggest Indian company—Reliance Industries alone—- stood at Rs2.5 trillion, about three-quarters of the aggregate market capitalisation of Rs3.8 trillion of the 575 companies listed on the KSE.