Interview with Muhammad Azam Khan — Economist/Capital Market Expert
[box type=”shadow” align=”” class=”” width=””]Profile: Muhammad Azam Khan has gotten more than 21 years of professional experience including 19 years in Pakistan’s financial sector comprising capital market with primary and secondary market activities, mutual funds, equity brokerage both local and international, block deals & corporate finance. Since 2008, he has been working as CEO/Nominee Director of a leading equity brokerage house providing expert advisory services to equity desk of major institutions (local and international both, portfolio management and 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. Mr. Khan started his professional career with international exposure at Mashreq Bank Dubai in a highly professional environment with dedication and commitment. Subsequently, he contributed his skills in the growth and development of Atlas Capital Markets, a subsidiary of Atlas Investment Bank Limited.
Muhammad Azam Khan is one of the pioneers to explore an idea and initiate online trading platform in Pakistan’s capital market and convinced stakeholders and old manual equity trading investors to divert towards this task which was not an easy chore. Furthermore, Mr. Khan 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.
He developed Sunrise, a complete brand equipped with diversified expertise of human resource, working passionately. He started his career with Bhayani Securities Private Limited (formerly Kausar Abbas Bhayani Securities) as a ‘Research Analyst’ way back in 2001 and then joined Atlas Investment Bank Limited in equity research and corporate finance department as ‘Investment Analyst’ in 2004, later was promoted as a ‘Senior Investment Analyst’ and was assigned to handle international corporate client (JP Morgan Chase & Co) with other local corporate institutions. It is easy to find out all his TV interviews on (PTV News, Business Plus, Dunya TV, JAAG TV, GEO News, ARY News and many more especially about Pakistan’s economy and stock market with investment strategies through Google with all print media articles especially in daily Dawn and Business Recorder on regular basis.
Muhammad Azam Khan is very proactive internationally and within Pakistan through his activities. He has attended conferences as guest speaker, delivered lectures in seminars besides other achievements. He organized cricket tournament between Mutual Funds Teams v/s Brokerage firms in 2010 held at Bahadurabad, Karachi, Pakistan. He attended seminar on ‘Global Financial Crisis’ in 2011 held at Dubai, UAE, delivered lecture on ‘IMF package and its impact’ in 2013 held at Dubai, UAE. He was a guest speaker on ‘Pakistan’s Capital Markets’ in 2014 held at Harvard University, United States of America, attended the ‘Marketing and Products’ Round Table Conference in 2015 held at Sri Lanka, attended ‘Capital Market-The Life Line for Economy’ Conference in 2016 held at Malaysia and attended ‘Role of Research in Investment Decisions’ Conference in 2016 held at Singapore. Sunrise Capital was Winner of 3rd FPCCI achievement award under his headship in 2016 held at Karachi, Pakistan. He was the Guest of Honor & Expert Speaker on ‘Crisis Management Training Workshop’ organized by Corporate Forum in 2016 held at PC Karachi, achieved award for Excellence from National Higher Education Conference in 2016 held at Karachi. Mr. Khan was invited by ‘All World Harvard in 2014’ and they recognized his contribution and progress in Pakistan’s capital market and acknowledged him ‘The best and fastest escalation entrepreneur’ of Pakistan’s capital markets.[/box]
PAKISTAN & GULF ECONOMIST had a detailed conversation with Muhammad Azam Khan about the capital market of Pakistan, impact of the FATF decisions on the stock exchange as well as economy of Pakistan. The excerpts of the conversation are as follows:
Currently Pakistan’s capital market is used as a tool to show government progress through electronic and social media. Further the main participants of Pakistan Stock Exchange (PSX) also use this forum to manipulate and force government to accept their business conditions without any action from regulators. From 1947 to July 25, 2018, we had only 218,000 investors but unfortunately till now we have only 118,000 investors including foreigners individual and corporate. On the other hand Bangladesh after the independence in 1971 has 4.5 million capital market investors and this is only because of the wish to control Pakistan Stock Exchange by a few known investors and their appointed staff posted in PSX, CDC and NCCPL.FY 2017/18/19 and now 2020 is not lucky for PSX investors because of cut in GDP growth from 5.5% to 2.5% and we have witnessed first time in the 74 years of Pakistan history, a negative GDP of -0.40% under the incumbent government, interest rates doubled from 5.75% to 13.25% and have now just eased off to 7% because of Covid-19, CPI inflation from 3.5% to 12.67% and the most important Pak rupee devalued by almost more than 40% till March 2020. July 25, 2018 was the general election day in Pakistan and at that time the PSX 100 Index was 42,500 with a market cap of $60 billion but after taking regulatory actions from regulator which found serious irregularities on main investors including very heavy tax evasion, the Index shrank to its actual position to 28,500 levels in August 2019 with a market cap of $42 billion and Pakistan lost almost $18 billion in just 13 months. The confidence given to the business community some time back boosted the PSX 100 Index once again and Index marched towards 41,000 levels till mid of December 2019 but is still trying to achieve levels where started 27 months ago.
There is no major development in the capital market of Pakistan for last two years and we have witnessed this zero development for many years as far as new products and options are concerned. There is focus on the development of the regulatory framework which subsequently increases the expenses of exchange including all other regulator like SECP, CDC and NCCPL that’s why sometimes it is felt that Pakistan capital market is overregulated. FY17/18/19 and now 2020 are zero performance years for all investors and especially big loss for the Chinese investors who took first 40% then 20% PSX shares at the rate of Rs. 28.75/- per share. We hope for better progress by the current government, no doubt there are lots of challenges faced by this government but as Pakistanis, we wish successful, secure and progressive Pakistan. Pakistan’s capital market has huge potential to perform as compared to the region but needs to make it independent from the hands of some known manipulators called investors and their own regulatory staff.
Pakistan’s annual oil import bill is around 14 to 15 billion dollar. Further, imports were high in the years from 2015 to 2017 because the economy flourished with the GDP growth of 5.5%. We saw huge imports of construction machinery especially for the growth of Gwadar Port and city. The import reached around $55 billion from $35 billion within two years but unfortunately did not see a major growth in exports and witnessed 100% difference in exports and imports in Pakistan. Now, the current deficit is controlled but exports are far behind in the region especially as compared to India and Bangladesh and crude oil is controlled at $40 per barrel. This looks to be a temporary relief and we have to be very vigilant and find a proper and permanent solution for this very serious issue. We cannot control crude prices but we can work very hard to improve our exports permanently. Current increase in exports is also temporary because the control on Covid-19 is much better than India, Bangladesh and other regional countries and Government of Pakistan allowed industries to work day and night. That’s why we are receiving orders to deliver on time.
Economic growth is always measured by a country’s currency strength which is directly linked to annual exports. The real growth and need of time for Pakistan is at least $50 billion annual exports otherwise controlling imports is artificial and we cannot sustain CA for longer. Pakistan Stock Exchange has sustained 40,000 levels although the GDP is negative. To date, Pakistan has made progress across all action plan items and has now largely addressed 21 out of the 27 action items. As all action plan deadlines have expired, the FATF strongly urges Pakistan to swiftly complete its full action plan by February 2021. FATF placed Pakistan on the grey list in June 2018 due to ‘strategic deficiencies’ in its AML/CFT regime after a push from India supported by the United States, the United Kingdom and some other European countries. Pakistan then committed at the highest level to a 27-point action plan, but failed to meet deadlines. The action plan items that have been addressed by Pakistan include highly important areas of financial sector, illegal hawala/hundi, cross-border currency regime, international cooperation in terrorist financing cases, amendments to the Anti-Terrorism Act, implementation of targeted financial sanctions by financial institutions, applying sanctions for AML/CFT violations and controlling facilities and services owned or controlled by designated persons and entities. However, in view of the six items in ‘Partially Addressed’ category, the plenary meeting decided to maintain status quo with respect to classification of Pakistan, for the time being. Pakistan Stock exchange witnessed foreign outflows of around $800 million since July 25, 2018 and no one from any corner of government asked why and tried to control this outgoing dollars although the valuation of Pakistan equity markets are the cheapest in the region. FATF compliances are compulsory now and Pakistan has to fulfill till Feb 2021 but we have zero percent change to be on blacklist. Now, this will depend on progress to be on grey list or out from it in coming months.
Pakistan Stock Exchange has nil impact to be on grey list or even out from it as equity outflows are not because of FATF issue. Geo political instability, Pakistan’s internal political uncertainty, rupee devaluation, foreign exchange reserves and most important out of control foreign debt which is approximately $120 billion till 2021 is the main concern and I did not see any major inflows in coming years except block deals, takeovers and investment in short term 3 months T-bills. Further, PSX has thumbs down dept market for foreign corporate institutions because we still have 100 million shares per day trading volume in main KSE 100 Index after 74 years of Independence.
“Pakistan is a golden bird in this region and we have witnessed everyone eyes on it but as a nation we have to respect and realize the potential of our beloved Pakistan and only for once we need serious and sincere leadership with this land of opportunity”.