Dear Friends,
On résiste à l’invasion des armées; on ne résiste pas à l’invasion des idées 
(No army can stop an idea whose time has come) – Victor Hugo

Retail investors are driving the global markets. While many businesses are hurt by the lock down, volumes are booming for brokers and exchanges. The Financial Times published this interesting chart today which shows the spike in volumes for retail market makers in the US. Some are calling it “cabin fever”. Stock trading is a top 10 item on which people in the US have used their social security checks distributed by President Trump.

By May, the retail volumes in the US had increased by more than 100% year over year. The same trends are visible in most other markets. Its a great time for retail brokers such as Flatex in Germany, DeGiro in Netherlands, Zerodha in India, SBI in Japan and Robinhood in the US.

There are many probable explanations. Locked down people have more time to think about their savings. Maybe the uncertainty regarding the job market is forcing people to develop a secondary income source. Or maybe the are just hooked on the market – just like kids get hooked to PUBG. (The retail fervor almost reminds me of the recent crypto-rush).

So the question is where is the Pakistani retail investor?


Retail investor participation in Pakistan equities remains very low. Less than 250,000 people have a stock trading account. 0.1% of the population. Substantially lower than even regional levels of around 1%. 

This is perhaps the most central issue with the capital markets. Most foreign institutional investors, including some on this emailing list, require the stocks to be liquid. Less than 10 companies in Pakistan have daily traded volumes of more than $1m, which is often considered a minimum threshold. In all capital markets, it is the retail investors who drive liquidity. 

As I wrote in my last blog, the phasing out of margin financing products in 2008 without replacement by an active derivative market drained the volumes. They declined from $500m per day in 2008 to less than $50m now.

The retail trader is missing.  

This will change. 

My bull case on Pakistan has always been based on the trust and hope on digitization. It is a zeitgeist. An idea whose time has come. It could be delayed, not stopped.

In 2018, I quit my job in London for Pakistan due to the guidance given by Pakistan Stock Exchange, after its acquisition by Shanghai and Shenzen Stock Exchanges, that they would soon enable digital on-boarding. 

It has been over two years since then and digital onboarding is yet to come.

But I am very hopeful that this must be a high priority area for the new CEO, Mr. Farrukh Khan. Mr. Khan was previously the Chief Business Development Officer at Acumun Fund in the UK. He must be cognizant of the power of tech, which he can leverage on. There are 60m people in Pakistan who have access to 4G and smartphones. He has a massive opportunity to drive a multi-fold growth in the capital markets.  

Let me illustrate the power of tech. Our stock investment app, KTrade.pk now has over 25,000 registered users. Our economics news blog (KASB.Blog) gets over 500 daily viewers. Last week we launched an online MOOC; KASB Varsity. It is an online MasterClass, based on CFA Investment Foundation program, taught by 13 global finance practitioners. Within 36 hours of launch we got over 1,500 enrolled students. KASB Varsity is now probably the largest business course in Pakistan! 
We have hosted more than 15 webinars with global icons in finance from Seattle to Shanghai including the legendary Mark Mobius (click here). More than 3000 attended his talk on Investing for Good. 

The reason for mentioning this is not, (purely) self aggrandizing. In fact, I would probably prefer discretion. Ironically, most regular followers of this blog are other brokers in Pakistan, and I notice that they like to follow what KASB does. However, I have presented this information, since it is the single biggest reason to be positive on Pakistan amidst the usual doom and gloom.

Pakistan is an isolated market. Small and insular. Not too dissimilar from the broader society. The adoption of technology will change this. It will connect the market to the 15m diaspora and to the global capital pools. Pakistani diaspora sends back $20bn per annum as remittances, even 1% of that into investment products could lead to massive liquidity influx. Technology will, and probably already has started to attract global capital. The valuation gap between Pakistan and other regional markets would eventually converge. 

KASB’s 50+ years of legacy in capital market gives me the conviction. It is our mission to be the force of change. It is inevitable. 


I am, yours truly,
Ali Farid Khwaja


* This is not research material and there is no investment recommendation in this blog. These are my personal views and do not represent the views of KASB Research team. 

Download Ktrade.pk – the only trading app in Pakistan which lets you track stock prices, mock trade and build a portfolio without a full trading account. Available on both Android and Apple stores.