The Pakistan Stock Exchange (PSX), formerly known as the Karachi Stock Exchange, was created when exchanges in Karachi, Lahore and Islamabad were merged by the Pakistan government. The PSX is now the only stock exchange in Pakistan. With 546 companies listed, the exchange has a total market capitalization of approximately $50 billion. Investing overseas can enhance your investment portfolio, but before you take such a step consider working with a financial advisor who’s familiar with global exchanges.
The Karachi Stock Exchange began operations in 1947 as the first stock exchange in Pakistan. In 1970 the Lahore exchange was established and in 1989 another exchange began in Islamabad. In 2016 the two newer exchanges were merged into the Karachi Stock Exchange and the entity was renamed the Pakistan Stock Exchange. Despite the name change, the major index tracking Pakistani stocks is still called the KSE 100.
The PSX is 40% owned by a consortium of Chinese entities including the Shanghai Stock Exchange and Shenzhen Stock Exchange. The balance is owned by the public, including individual local and foreign investors.
How PSX Works
Companies listed on the PSX are divided into two groups. The Regular or Ready market consists of all the companies listed. The small and medium enterprise market is where companies capitalized at between $150,000 and $1.2 million are traded. The small and medium enterprise market is tailored for institutions and high-net-worth individual investors. The PSX trades weekdays. On Monday through Thursday, the market is open from 9:30 a.m. to 3:30 p.m. On Friday, the market is open from 9:15 a.m. to 4:30 p.m., with a break from noon to 2:30. Pricing on the PSX is done in Pakistan rupees (PKR). The PKR is valued at approximately 0.0061 U.S. dollars.
A convenient way for foreign investors to invest in PSX stocks is through exchange-traded funds (ETFs) that have exposure to Pakistan. The Global X MSCI Pakistan ETF targets the Pakistan economy by investing in a basket of the largest companies that trade on the PSX. Many ETFs that specialize in emerging markets also have varying degrees of exposure to PSX securities.
PSX Listing Requirements
In order to be listed on the PSX companies have to meet financial and disclosure standards. The requirements include:
- Minimum paid up capital of $1.2 million
- Minimum free float of at least 25% of the issued share capital
- At least 5 million free float shares within a year of the approval for listing
Largest PSX Stocks
The PSX is dominated by companies originating in Pakistan. Listed companies represent 35 business sectors. The largest by market capitalization are in energy, building materials and consumer products.
- Oil & Gas Development Company Limited (OGDC), oil and gas exploration
- Pakistan Petroleum Limited, (PPL), oil and gas exploration
- Lucky Cement Limited (LUCK), cement and building materials
- Pakistan Tobacco Company Limited (PAKT), tobacco
- Nestle Pakistan Limited (NESTLE), food and personal care products
Special PSX Considerations
In addition to the KSE 100 Index, the KSE All Share Index and the KSE 30 Index, the PSX has indices for investors who want to put their money only into companies that comply with shariah law. The PSX-KMI All Shares Index and KMI 30 Index track shariah-compliant companies.
Shariah law prohibits investments in tobacco, alcohol, gambling and other industries deemed to be based on vices. The shariah compliance of companies listed in the PSX KMI indices is certified by shariah scholars.
How to Trade on the PSX
Pakistani citizens who are living overseas can trade on the PSX by opening a Roshan digital account with one of the banks that are designated for this purpose. The process is all-digital and can be conducted entirely online. Having a Roshan account allows a non-resident Pakistani to transfer funds and pay bills as well as, when paired with an account in a PSX member brokerage, invest in securities traded on the PSX.
Other foreign investors can open a Special Convertible Rupee Account (SCRA.) The SCRA lets foreign investors transfer funds for securities purchases to and from the account. PSX member brokers, designated banks and some international brokers can set up SCRAs for foreign investors. The PSX maintains an online list of banks that can help with this task.
The Karachi Stock Exchange is now called the Pakistan Stock Exchange (PSX) after merging with two other Pakistan exchanges, but the major index tracking Pakistani stocks is still called the KSE 100. Foreign citizens and non-resident Pakistanis can trade on the PSX using special accounts. Investors concerned about complying with shariah law can choose from companies certified as shariah-compliant and indices tracking baskets of shariah-compliant companies.
Tips on Investing
- Investors inexperienced at international investing can benefit from working with an experienced financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with several in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
- Since investing in non-U.S. securities can be more complicated than investing on a U.S. exchange, it’s important to keep close tabs on how much of your portfolio goes into such investments. A free, easy-to-use asset allocation calculator can be immensely helpful in keeping your investments balanced.
Photo credit: ©iStock.com/Aleem_khan, ©iStock.com/HomoCosmicos, ©iStock.com/NatanaelGinting