Post‐spillover effects of China's integration on Pakistan Stock Exchange

Abstract

The Pakistan Stock Exchange (PSX) strategic partnership with the Chinese consortium shifted trends and transition patterns from global to Chinese exchanges. Any substantial changes in these markets created a significant impact on the PSX. After the partnership with the Chinese consortium, Pakistan's mean returns and price volatility dynamics have shifted toward the regional exchanges, connectivity, and alliances, which has increased regional integration. Any systematic change in trading policies and framework of partner exchanges may substantially impact the trading dynamics and volume of the Pakistan stock market and local investors. This changing behavior will enhance financial synergies in the Pakistan stock market's trading capacity by bringing Chinese cross‐listed IPOs and portfolio investment and financial vulnerabilities in exchange rate risk and volatility spillover effects from partner exchanges.

Beyond ports, roads and railways: Chinese economic statecraft, the Belt and Road Initiative and the politics of financial infrastructures

“…54 As Aliuddin Ansari, Chairman of Alfalah CLSA Securities, noted during an investor event in 2018, ‘Your stock market is now owned by the Chinese and China is coming to Pakistan’ (cited in Masooma, 2018). As Wahid et al (2021) demonstrate in an econometric analysis of stock market volatility dynamics, over time Pakistan’s stock market has gradually decoupled from global markets and instead aligned more closely with Chinese market dynamics. Overall, PSX’s acquisition has clearly contributed to a deeper integration of the two countries’ financial systems in order to facilitate BRI.…”