Pakistani privatization: State sell-offs should perk up equity market
It’s been a ropey year so far for Pakistan’s embattled stock markets but better news is on the horizon for global investors. Over the next 12 months, the government is expected to push ahead with aggressive plans to privatize a clutch of state-run firms, as the government seeks to cut into a current account deficit that widened to $14 billion in the fiscal year to end-June 2008, from less than half that a year earlier.
Shareholder backlash: paramilitary forces patrol during a protest at the Karachi Stock Exchange on July 17. Hundreds of angry investors, upset by plunging share prices, demanded a temporary closure of the market
On the slab over the next year are expected to be significant state holdings in National Bank of Pakistan, Habib Bank and United Bank. Pakistan Steel Mills, the country’s largest steel mill operator, in which the state owns a 10% stake, is also expected to raise a significant chunk of change for the country’s embattled government. Also up for sale between now and end-June 2009 are companies including Hazara Phosphate Fertilizers (state owns 90%), Jamshoro Power (51%) and Faisalabad Electric Supply (56%). Many of the investors are expected to be global private equity firms such as Texas Pacific Group and Carlyle, and cash-rich Gulf-based corporates and sovereign wealth funds. "Private equity is active and growing, primarily driven by Middle East based sponsors," says Soofian Zuberi, head of Asian equity capital markets at Merrill Lynch in Hong Kong. "The government has announced a privatization programme over the next 12 months – featuring banks, a steel mill and other assets – and, given the government’s aim to reduce the budget deficit, those deals need to be done.