WHAT IS STOCK EXCHANGE

Stock exchange is a market place where shares can be bought

and sold and where the buyers and sellers of securities both
equity and debt meet.

ROLE OF STOCK EXCHANGE

The Stock Exchange’s role is to ensure that the market is

working efficiently, fairly and transparently.

The companies raise their capital from the Exchange for their
business ventures and investors get opportunities to invest for
profit in various business.
 KSE 100 INDEX

The KSE-100 Index is a capital-weighted index and

consists of highly market capitalized 100 companies
representing about 86% of the total market
capitalization of the Exchange. As of yesterday the
value of one point is approximately 243 million
 BENEFITS OF LISTING

Financing can be arranged through IPO

Listed company enjoys higher esteem in the eyes of its debtors and
creditors because of the availability of its financial statements for
general public and are closely monitored by the regulators.

Fund can be raised at comparatively lower cost.

Listed Companies get much higher exposure as their quotations are

published in many newspapers.

Sponsors and shareholders can easily pledged the shares of listed

companies to obtain loan.
 BENEFITS OF LISTING

Listed companies carry comparatively higher prestige and are

better able to market their products/ services.

Due to their published financial statements and wider

representation on the Board of Directors they are better able to
deal with government and other regulators on various issues.

Due to easy access to funds from the market in the form of right
issues and borrowings, listed companies have witnessed far
greater growth both in Pakistan and other countries.
 Risk & Reward

If a company performs well the prices goes up and the prices may
go down and the value of the investment decreases if the company
performs bad.

Other factors such as general economic climate, law and order

situation, relations with the neighboring countries may also effect
the share prices.

Investment in shares therefore investment risk capital. The risk

can be reduced with the careful planning and vigorous homework
and analyzing companies
 Dos & DONTs

To Do:
 Through research and homework

 Choose the right broker

 Think of long-term benefit rather the short-term

 Open your own account in CDC

 Know your investment profile

 Beware of scams
 Dos & DONTs

Donts
 Never trust anyone except yourself

 Count your reward against risk

 Not to deal with unauthorized people

 TRADING CYCLE

• Selection of scrip, broker.

• Opening of account with CDC and the broker

• Placement of order for purchase/ sale of shares of a X Co. at the given price.

•Broker feeds the order on computer through KATS. Selection of scrip

• On matching of order the trade executes.
• On confirmation of trade the broker provides: Receipt
•Time at which the order executed order
•Nature of transaction (T+2, Future or Spot)
•Price at which the transaction executed
•Commission charges of broker Matching

• Under T+2 system the payment is made on the 3 rd day of the transaction and your
CDC account will be credited
• Broker makes payment to the Clearing House of the Exchange.
 MEMBERSHIP
Membership of KSE is presently fixed at 200;

Prospective members have to purchase a seat from retiring members.

The price of the membership seat is freely negotiated between the

buyers and sellers.

Since June 1990, membership is open to corporate entities.

Foreign investors are allowed to hold up to 100 percent shareholding

in corporate brokerage houses.
 COT / Badla

The Mechanism Of Purchasing a Security On a Single

Day Settlement And Re-selling It On The Next Day
Settlement At a Pre-determined Differential Price is
Termed Carry Over Transaction or Badla. In COT, the
traders arrange financing after the trade.
• Margin Financing

In margin financing the investor would first

arrange funds and then undertake trading. Margin
accounts allow investor to buy shares with a
relatively small amount of cash upfront which is
normal 30%.
 CONTINEOUS FINANCING SYSTEM
CFS :
The Mechanism of Purchasing a Security in a given trading day by
borrowing funds. The CFS Market is available for the entire
trading period and run parallel to the Ready Market. The CFS
facility is available for 32 scrips
The financier keeps the CFS financed securities in a separate
account maintained with the Central Depository Company of
Pakistan Limited in order to ensure that these securities are not
used for loaning against blank and short selling.

. The rates are determine through electronic supply / demand

mechanism.
 MAJOR PARAMETERS

Number of companies 663

Listed Capital Rs. in billion 495

US$ in billion 8.2

Market Capitalization Rs in billion 2,932

US$ in billion 48.8

KSE 100 Index 10373

Average daily turnover Shares in million 382
Average value of daily turnover Rs. in billion 48
US$ in million 807

As on June 05, 2006

 WHAT DO INVESTORS LOOK FOR

The main factors that investors consider when evaluating the attractiveness
of an emerging market.

1. Economic Development
• Sustainability of economic achievement and growth (e.g. sound fiscal
and monetary policies)
• Resilience to adverse internal or external events
2. Market Development and Operational Efficiency
• Clear market regulations and enforcement of laws (protection of
minority shareholders)
• Efficient Settlement of trades
• Availability of market data and disclosure of information in general

3. Accessibility to Foreign Investors

• Foreign investment restrictions, such as company or industry Foreign
Ownership Limits
• Freedom of capital flows
 REFORMS

Economic Reforms

Corporate Reforms

Capital Market Reforms & Initiatives

 REFORMS
Introduction of Economic Reforms Agenda in Dec. 1999.

• To Stabilize Country’s Debt Situation by Restoring Macroeconomic Stability

• Revive Economic Growth

• Reverse the Trend of Increasing Poverty

• Improve Governance
• GDP growth registered above 8.4% & 6.6
% respectively.
• Foreign Exchange Reserves of over $12 bn

• S&P Upgrades Country’s Credit Rating

• Stable Pak Rupee

• Interest rates brought down

• Impressive Export Growth

• Encouraging Response on Issuance of

Bond (Euro,Islamic Bond (Sukkuk))

• Good Corporate Announcements/ Results

by Listed Companies

• Privatization through Stock Market

• Improvement in Relations with US & India

 REFORMS
Corporate Reforms

• Code of Corporate Governance

• Timely Holding of AGMs

• Responsibilities of Directors Enhanced

• Quality Audits

• Quarterly Financial Results

• Enhanced Disclosure Requirements

 Listed Companies Performance
2001 2002 2003 2004 2005 % INC.
Paid-up Cap. 226 277 300 375 473 109
(Rs. Million)
Sales 1112 1169 1329 1538 1805 62
(Rs. Million)

Profit Before 62 93 138 227 326 425

Tax
(Rs. Million)
Taxation 29 36 47 61 93 222
(Rs. Million)
Profit After Tax 33 57 91 166 233 606
(Rs. Million)

Dividend 41 57 63 100 140 242

Amount
(Rs. Million)
 REFORMS
Capital Market Reforms & Initiatives

• T+3 Settlement System

• All Transactions Fully Automated

• Undisclosed Trading

• Future Contracts

• Central Depository Company

• National Clearing & Settlement System

 REFORMS
Capital Market Reforms & Initiatives
• Internet Based Trading

• Odd Lots Trading on KATS

• Live Quotes on Mobile Phones

• Display Only Terminals (DOT)

• Gateway for Internet Trading

• Clearing House Protection Fund

• Investors Protection Fund

 REFORMS
Capital Market Reforms & Initiatives

• Risk Management
Capital Adequacy
Exposure Monitoring
Market Surveillance
Circuit Breakers / Exit Mechanism
Implementation of pre trade verification

• Marketing & Research Department

Image Enhancement
Investors’ Briefing
Close Liaison with Media
 TECHNOLOGICAL ADVANCEMENTS

• Hardware Additions

• Homegrown Software

• Capable of Handling more than 500,000 trades

• Capable of Providing Virtually Unlimited TWS

• Real-Time Market Access through Internet

 THE CHALLENGES AHEAD

• Margin Financing

• OTC Market

• Increasing the Free Float

• Attracting New Listings

• Promotion of TFC Trade

• Cross-Border Listing Possibilities

• Trading of Index Futures

• Investors’ Education
 Best Performing Market
of the World

The Karachi Stock Exchange was declared as “The Best Performing Market of
the World” in the year 2002, registering an increase of 112% in the KSE 100
Index.

In years 2003 and 2004, the Exchange was also amongst the Top 10 Best
Performing Markets of the World and the Index increased by 65% and 39%
respectively.
 CRISIS, DOW JONES INDUSTRIAL AVERAGE
DECLINES & SUBSEQUENT PERFORMANCE

EVENT REACTION DATES % LOSS

Exchange closes WW1 22 July 1914 to 24 Dec 1914 (10.20)

German invades France 9 May 1940 to 22 June 1940 (17.10)

Pearl Harbour 6 Dec 1941 to 10 Dec 1941 (6.50)

Korean War 23 June 1950 to 13 July 1950 (12.00)

Eisenhower heart attack 23 Sep 1955 to 26 Sep 1955 (6.50)

JFK Assassination 21 Nov 1963 to 22 Nov 1963 (2.90)

Martin Luther King assassinated 3 Apr 1968 to 5 Apr 1968 (0.40)

 CRISIS, DOW JONES INDUSTRIAL AVERAGE
DECLINES & SUBSEQUENT PERFORMANCE

EVENT REACTION DATES % LOSS

US Bombs Cambodia 29 Apr 1970 to 26 May 1970 (14.40)

Arab Oil Embargo 16 Oct 1973 to 5 Dec 1973 (18.50)

Nixon Resigns 7 Aug 1974 to 29 Aug 1974 (17.60)

Financial panic 1987 2 Oct 1987 to 19 Oct 1987 (34.20)

Iraq invades Kuwait 2 Aug 1990 to 23 Aug 1990 (13.30)

Asian stock market crisis 7 Oct 1997 to 27 Oct 1997 (12.40)

WTC & Pentagon attacks 11 Sep 2001 to 21 Sep 2001 (14.30)
 Crash & Surge
CFS
Implementation 25
Bn

Indo-Pak Improvement in
Tension Indo-Pak Settlement
Relations Crisis

New Economic Agenda Improving CVT Levy

12,000.00
11,500.00
Economy
11,000.00
10,500.00
10,000.00 Change of
9,500.00
9,000.00
8,500.00
Regime Terrorists Attack
8,000.00
7,500.00 Nuclear in US
7,000.00
6,500.00
6,000.00
Tests (9/11)
5,500.00
5,000.00
S&P upgraded
4,500.00
4,000.00 rating
3,500.00
3,000.00
2,500.00
2,000.00
1,500.00
1,000.00
500.00
14-Jan-98

26-Jun-98

9-Feb-00

23-Jul-02

20-May-03

1-Mar-05

30-Jun-05
18-Nov-98

4-Jul-00

23-Nov-00

28-Feb-02

17-Dec-02

30-Jan-04

31-Dec-04

15-Feb-06
18-Sep-03
10-Sep-99

28-Sep-01
20-Apr-99

30-Apr-01
 KSE-100 VS OTHER WORLD MARKETS
December 31, 2004 to December 31, 2005
EXCHANGE INDEX Increase in Points %

Seoul Composite 483.45 54.0

KSE KSE 100 3338.21 53.7

Mumbai BSE 30 2795.24 42.3
Tokyo Nikkei 4622.67 40.2
Colombo All Share 415.32 27.6
Frankfurt Dax 1152.18 27.1
Amsterdam AEX General 88.70 25.5
Paris CAC 40 894.07 23.4
London FTSE 804.50 16.7
Jakarta Composite 161.75 16.2
Australia AORD 655.70 16.2
Singapore Strait Times 281.20 13.6
New Zealand NZSX 50 306.07 10.0
 KSE-100 VS OTHER WORLD MARKETS
December 31, 2004 to December 31, 2005

EXCHANGE INDEX INCREASE IN POINTS %

Bangkok SET 45.63 6.8

Taiwan T. Weighted 408.65 6.7
Hong Kong Hang Seng 646.29 4.5
NYSE NASDAQ 29.88 1.4
Kuala Lumpur Composite -7.64 -0.8
China Shanghai Composite -105.44 -8.3

• KSE 100 index increased by 817 points since Jan

01, 2006 which is 8.6%
 KSE-100 VS OTHER WORLD MARKETS
December 31, 2001 to December 31, 2002

EXCHANGE INDEX Increase in Points %

KSE KSE100 1428.35 112.20

Argentina MerVal 229.56 77.71
Kuwait KSE Index 660.40 38.63
Colombo All Share 194.07 31.25
Bangkok Set 52.63 17.32
Mumbai BSE 30 114.95 3.52
New Zealand NZSX 40 (107.87) (5.25)
Kuala Lumpur Composite (49.77) (7.15)
Australia AORD (384.40) (11.44)
NYSE Dowjones (1679.87) (16.76)
Brazil BVSP (2310.00) (17.01)
Singapore Straits Time (282.57) (17.40)
China Shanghai Comp. (288.32) (17.52)
 KSE-100 VS OTHER WORLD MARKETS
December 31, 2001 to December 31, 2002

EXCHANGE INDEX Increase in Points %

China Shanghai Comp. (288.32) (17.52)

Hong Kong Hang Seng (2075.92) (18.21)
Tokyo Nikkei (1963.67) (18.63)
London FTSE (1277.00) (24.48)
Amsterdam AEX General (184.05) (36.32)
Frankfurt Dax (2267.47) (43.94)
 DIVIDEND YIELD & P/E

The average dividend yield of listed companies is about 6 to 8 percent.

which is very attractive when compared with other stock exchanges of
the world and the domestic Saving Deposit Schemes and T – Bills.

The Price Earning Ratio (PE) of KSE is 12.51 based on financial results
2005 which is very attractive in light of future growth as compared to
other stock markets of the world where PE Ratios are between 18-20.
 SECTORS LISTED AT KSE

SECTORS
Technology & Communication
Power Generation & Distribution
Modarabas
Closed-end Mutual Funds
Inv Banks/ Inv Cos/ Securities Cos
Commercial Banks
Woollen
Fertilizer
Leasing
Leather & Tanneries
Engineering
Oil & Gas Marketing Companies
Oil & Gas Exploration Companies
 SECTORS LISTED AT KSE

SECTORS
Food & Personal Care Products
Cable & Electrical Goods
Tobacco
Paper & Board
Textile Weaving
Jute
Automobile Assembler
Textile Composite
Refinery
Pharmaceuticals
Automobile Parts & Accessories
Sugar & Allied Industries
Glass & Ceramics
 SECTORS LISTED AT KSE

SECTORS
Synthetic & Rayon
Insurance
Textile Spinning
Chemical
Cement
Miscellaneous
Transport
Vanaspati & Allied Industries