BSE, Karachi Stock Exchange set to form first-of-its-kind alliance
Muhammad Ali has not had the best of tours to New Delhi personally. The Chairman of Pakistan's Security Exchange Commission lost his mobile phone containing key data and contacts and had to battle the traffic in the capital to reach the airport in the nick of time to catch a long Emirates Airlines flight to Islamabad via Dubai.
But Ali had reasons to be happy with his stopover in India for the World Economic Forum (WEF). He was involved in the negotiations between the representatives of the Bombay Stock Exchange (BSE) and the Karachi Stock Exchange (KSE) to discuss a possible partnership. The two exchanges plan to offer trading in each other's top indices.
"We will sign the MoU (memorandum of understanding) very soon. This would be a first step in cementing the financial relationship between the two countries," Ali told Business Today. He added that since trading would be done in the local currency of the two countries, the proposal could be implemented easily and quickly.
"People here have shown interest in trading on the KSE, but we are going step by step." As part of the plan, the KSE-100 index would be traded on the BSE and the Sensex - India's benchmark index - on the KSE.
A BSE spokesperson confirmed the news, and said that the negotiations between the two exchanges are almost over. "We expect signing of the MoU by the end of November," he said. There have been some changes in the terms and conditions set by the KSE, which the BSE is examining.
Significantly, this would be the first time the BSE is listing its indices on a foreign exchange. Rival NSE already trades its Nifty index on the Singapore Exchange. BSE has a strategic tie-up with the Frankfurt-based Deutsche Borse, which holds a five per cent stake in the Mumbai-based exchange.
The BSE is the oldest stock exchange in Asia with a market capitalisation of over $1 trillion with around 5,000 listed companies, making it the world's 14th largest stock exchange. The KSE has a market capitalisation of $40 billion with 652 listed companies.
A partnership between the two exchanges would be significant since it is happening in the backdrop of both India and Pakistan announcing a series of measures to boost bilateral trade as goodwill gestures. The Reserve Bank of India is considering Pakistan's Habib Bank's application to set up a branch in Mumbai. Its counterpart State Bank of Pakistan is contemplating allowing Punjab & Sind Bank to set up its office in Karachi. Moreover, Pakistan has decided to grant India the Most Favoured Nation status from January 1 and has also expanded the list of items to be exported to and imported from India.
If the MoU between the two exchanges is signed by November-end, it could set the stage for more confidence building measures related to trade and business between the two countries. India's Commerce Minister Anand Sharma has already said that India is committed to improving relations with Pakistan.
Source : http://businesstoday.intoday.in