Investment Analysis and portfolio Management

History of Pakistan Stock Exchange

Submitted by:
Zeeshan khan

Submitted to:

Prof. Dr. Aijaz Hashmi

Roll No.

13530

Faculty of Management Sciences

National University of Modern Languages
H-9 Campus Islamabad.
 PSX HISTORY
Pakistan Stock Exchange was established on September 18, 1947 and was formally incorporated
on March 10, 1949 under the name of ‘Karachi Stock Exchange’, as a Company limited by
Guarantee. In October 1970, a second stock exchange was established in Lahore to meet the
stock trading needs of the provincial metropolis. In October 1989, Islamabad Stock Exchange
was established to cater to the investors of the northern parts of the country. Because the three
exchanges had separate management, trading interfaces, indices, and had no mutualized
structure, therefore the Stock Exchanges (Corporatization, Demutualization and Integration) Act,
2012 was promulgated by the Government of Pakistan which ultimately resulted in the three
exchanges integrating their operations effective January 11, 2016 under the new name ‘Pakistan
Stock Exchange Limited’ (PSX).
PSX has made significant strides in its history, having a small presence of 5 listed companies
initially with a total paid-up capital of Rs 37 Mn. In 1960 there were 81 companies with a market
capitalization of Rs 1.8 Bn whereas now there are 546* companies listed in the bourse with a
market capitalization of Rs 7.692* Tn. The listed companies are distributed amongst 35 sectors/
groups of industries.
PSX aspires to be one of the leading Exchanges of the world having an enviable record of being
the best performing Stock Exchange in Asia. In recent past PSX had an All Index Growth of
26% Annual CAGR from 2012-2017. PSX aims to reclaim that status and has plans in place to
make it a robust and efficient Stock Exchange at par or above par with other Stock Exchanges in
the world. It is at the forefront of Pakistan’s economy, being the only major institution helping
capital formation in the country. Pakistan Stock Exchange has in place functional and operational
capabilities at par with any global Stock Exchange with robust trading systems (e.g.: KATS-
Karachi Automated Trading System, KITS-Internet based order routing system, BATS-Bonds
Automated Trading System), IT security systems, and a progressive regulatory framework.
Currently, 7 indices are listed on PSX as follows:

Market Indexes:
KSE 100 INDEX: The KSE-100 Index was introduced in November 1991 with base value of
1,000 points. The Index comprises of 100 companies selected on the basis of sector
representation and highest free-float capitalization, which captures over 80% of the total free-
float capitalization of the companies listed on the Exchange. 36 companies are selected i.e. one
company from each sector on the basis of the largest free-float capitalization and the remaining
64 companies are selected on the basis of largest free-float capitalization in descending order.
This is a total return index i.e. dividend, bonus and rights are adjusted.
KSE ALL INDEX: In 1995, the need was felt for an all share index to reconfirm the KSE-100
and also to provide the basis of index trading in future. By August 29, 1995 the KSE-All Share
Index was constructed which became operative on September 18, 1995.
KMI 30 INDEX: Introduced in Spetember 2008, the objective of KSE-Meezan Index (KMI)
is to serve as a gauge for measuring the performance of Shariah compliant equity investments.
Besides tracking performance of Shariah compliant equities, its construction will increase
investor trust and enhance their participation.
ALL SHARES IN ISLAMIC INDEX: Introduced on November 18, 2015 as a joint effort
by the management of Pakistan Stock Exchange (PSX) and Meezan Islamic Bank Limited.The
principal objective of the All Shares Islamic Index is to gauge the performance of the Shariah
compliant segment of the equity market. Accordingly, it is important that all those shares which
meet the Shariah screening criteria should be included in the All Shares Islamic Index in order to
ensure completeness of the index and adherence to the core objective of the proposed All Shares
Islamic Index.