Professional Documents
Culture Documents
Karachi
Stock
Exchange
“Empowering The
Companies of Tomorrow”
Mohammad Ali Jinnah University 1
Karachi Stock Exchange
Financial
Institution
Section: B
Karachi
Stock
Exchange
By;
M. Laraib (SP07-
BB-0082)
Shahbaz Nawaz
(Sp07-BB-0150)
TABLE OF CONTENTS
OVERVIEW..................................................................................................................5
INTRODUCTION.........................................................................................................6
HISTORY....................................................................................................................10
ROLES OF STOCK EXCHANGE..............................................................................13
Raising capital for businesses..............................................................................13
Mobilizing savings for investment.......................................................................13
Facilitating company growth...............................................................................13
Redistribution of wealth.......................................................................................13
Corporate governance..........................................................................................14
Creating investment opportunities for small investors........................................14
Government capital-raising for development projects.........................................14
Barometer of the economy...................................................................................15
MAJOR STOCK EXCHANGES.................................................................................17
KARACHI STOCK EXCHANGE..............................................................................18
MARKET INDICES....................................................................................................19
KSE 100 Index.........................................................................................................19
KSE 30 Index...........................................................................................................22
KMI-30....................................................................................................................29
PROGRESS REPORT.................................................................................................35
ROLE AND FUNCTIONS OF
A STOCK EXCHANGE ............................................................................................37
LISTING REQUIREMENTS......................................................................................38
Requirements by stock exchange.........................................................................39
Requirements by Karachi stock exchange...........................................................39
LISTED SECTORS.....................................................................................................41
PRODUCTS AND SERVICES...................................................................................42
THE FUTURE OF STOCK EXCHANGES................................................................44
FUTURE PLANS OF KSE..........................................................................................46
REFERENCES............................................................................................................47
OVERVIEW
INTRODUCTION
Definition
A stock exchange, share market or bourse is a
corporation or mutual organization which provides
facilities for stock brokers and trader s, to trade company
stocks and other security.
Vision
Mission
THIER CUSTOMER
THE TECHNOLOGY
HISTORY
In 11th century France the courtiers de change was concerned
with managing and regulating the debts of agricultural
The first index was the KSE 50 Index. Karachi Stock Exchange
is the biggest and most liquid exchange and has been declared
as the “Best Performing Stock Market of the World for the year
2002”. As on May 30, 2008, 654 companies were listed with a
market capitalization of Rs. 3,746.203 billion (US$ 56.334
billion) having listed capital of Rs. 705.873 billion (US$ 10.615
billion). The KSE 100TM Index closed at 12130.51 on May 30,
2008.
KSE has been well into the 4th year of being one of the Best
Performing Markets of the world as declared by the
international magazine “Business Week”. Similarly the US
newspaper, USA Today, termed Karachi Stock Exchange as
one of the best performing bourses in the world.
Redistribution of wealth
Corporate governance
At the stock exchange, share prices rise and fall depending, largely, on market
forces. Share prices tend to rise or remain stable when companies and the
economy in general show signs of stability and growth. An economic
recession, depression, or financial crisis could eventually lead to a stock
market crash. Therefore the movement of share prices and in general of the
stock indexes can be an indicator of the general trend in the economy.
MAJOR STOCK
EXCHANGES
Twenty Major Stock Exchanges in the World: Market
Capitalization & Year-to-date Turnover at the end of
Market Value Total Share Turnover
Region Stock Exchange
(millions USD) (millions USD)
Africa Johannesburg Securities Exchange 432,422.1 17,999.7
Americas NASDAQ 2,203,759.6 2,325,238.3
Americas São Paulo Stock Exchange 611,695.0 30,748.5
Americas Toronto Stock Exchange 997,997.4 84,323.0
Americas New York Stock Exchange 9,363,074.0 1,517,615.7
Asia-Pacific Australian Securities Exchange 587,602.7 37,400.1
Asia-Pacific Bombay Stock Exchange 613,187.6 14,425.0
Asia-Pacific Hong Kong Stock Exchange 1,237,999.5 80,696.8
Asia-Pacific Korea Exchange 470,417.3 81,755.0
Asia-Pacific National Stock Exchange of India 572,566.8 39,057.1
Asia-Pacific Shanghai Stock Exchange 1,557,161.3 142,144.2
Asia-Pacific Shenzhen Stock Exchange 389,248.3 75,365.5
Asia-Pacific Tokyo Stock Exchange 2,922,616.3 301,781.5
Europe Euronext 1,862,930.9 146,173.3
Europe Frankfurt Stock Exchange (Deutsche Börse) 937,452.9 264,970.3
Europe London Stock Exchange 1,758,157.7 241,151.1
Madrid Stock Exchange (Bolsas y Mercados
Europe 871,061.4 114,994.0
Españoles)
Europe Milan Stock Exchange (Borsa Italiana) 456,206.7 48,094.8
Europe Nordic Stock Exchange Group OMX1 503,725.8 55,299.9
Europe Swiss Exchange 761,896.1 63,435.6
January 2009
KARACHI STOCK
EXCHANGE
The biggest Stock exchange of Pakistan located in Karachi is
the Karachi Stock Exchange. Due to the liquidity offered by the
Karachi Stock Exchange, it is known as stated as the “Best
Performing Stock Market of the World for the year 2002”.
Arbitration
Settlement
MARKET INDICES
KSE 100 Index
The KSE 100TM Index was introduced in 1991 and comprises
of 100 companies selected on the basis of sector
representation and highest market capitalization, which
captures over 80% of the total market capitalization of the
companies listed on the Exchange. Out of 35 Sectors, 34
companies are selected i.e., one company from each Sector
(excluding Open-End Mutual Fund) on the basis of the large
market capitalization and the remaining 66 companies are
selected on the basis of highest market capitalization. This is a
total return index i.e. dividend, bonus and rights are adjusted.
The same methodology is applicable in the case of All Share
Index, which includes all the listed companies, (except Open-
End Mutual Funds).
1. OBJECTIVE
LIST OF SECTORS
1 Open-end Mutual Funds 19 Oil & Gas Marketing Companies
2 Close-end Mutual Funds 20 Oil & Gas Exploration Companies
3 Modarabas 21 Engineering
4 Leasing Companies 22 Automobile Assembler
5 Investment Banks/Inv. Cos./Securities Cos. 23 Automobile
Parts & Accessories
6 Commercial Banks 24 Cables & Electric Goods
7 Insurance 25 Transport
8 Textile Spinning 26 Technology & Communication
9 Textile Weaving 27 Fertilizer
10 Textile Composite 28 Pharmaceuticals
11 Woollen 29 Chemical
12 Synthetic & Rayon 30 Paper & Board
13 Jute 31 Vanaspati & Allied Industries
Rule # 2 The remaining index places (in this case 66) are
taken up by the largest market capitalisation companies in
descending order.
The fact that the sector rule is identified as Rule 1 does not
imply that it is more important, only that the nature of the
selection process is such that it is the screening that is done
first.
4. CALCULATION METHODOLOGY
Thus, the total market value of the base period has een
assigned a value of 1000 points. n example of how the KSE100
Index is calculated can be demonstrated by using a three-
stock ample. Table 1 illustrates the process. First, a starting
point is selected and the initial value of the hree-stock index
set equal to 1000.
The three market values are added up, or aggregated, and set
equal to 1000 to form the base period value. All future market
values will be compared to base period market value in
indexed form.
KSE 30 Index
The primary objective of the KSE-30 Index is to have a
benchmark by which the stock price performance can be
compared to over a period of time. In particular, the KSE-30
Index is designed to provide investors with a sense of how
large company’s scrips of the Pakistan’s equity market are
performing. Thus, the KSE-30 Index will be similar to other
indicators that track various sectors of country’s economic
activity such as the gross national product, consumer price
index, etc.
• Introduced in 2006
• Based on the “Free Float Methodology”
• Includes only the top 30 most liquid companies
listed on the KSE.
4. Free-Float Bands:
SELECTION CRITERIA
The companies which qualify the prerequisites will be selected
on the basis of highest marks obtained as per the following
criteria:
2 Liquidity
• First the impact cost is calculated separately for the buy and
the sell side in each order book for past six months.
• The buy side impact cost (or the sell side impact cost) is the
simple average of the buy side impact cost (or the sell side
impact cost) computed in the last six months.
3 Final Rank
KMI-30
• Introduced in September 2008
• KMI comprises of 30 Companies that quality the KMI
Shariah screening criteria and are weighted by float
adjusted market capitalization.
• 12% cap on weights of individual securities.
• Rebalancing of the Index will be done bi-annually.
• Shariah Supervisory Board of Meezan Bank chaired
by eminent Shariah scholar Justice (Retd.) Mufti
Muhammad Taqi Usmani.
• A total return Index based on free float
methodology
2 Eligibility Criteria
3 Selection Criteria
All the eligible companies for the Islamic Index can be included
up to a maximum of thirty (30) companies. During the
selection process, each company’s financial reports are
thoroughly reviewed by research analysts of Al Meezan to
ensure that the company meets benchmarks or thresholds for
Shariah compliance screening. Those that are found to be non-
compliant are screened out. The industries that are considered
non-compliant (as defined in the eligibility criteria) are not
considered for inclusion in the Islamic, as these would not be
appropriate for investment from Shariah perspective. From
the list of Shariah compliant companies, securities are selected
on the basis of free float and Impact Cost. While ranking the
companies 50% weight is assigned to free float capitalization
and the remaining 50% is allocated to Impact Cost such that
the companies with the highest free float and the lowest
Impact Cost get the highest rank in the selection process. Top
PROGRESS REPORT
In million except companies, index and bonds
data
Fair
The exchange assures that no investor will have an
undue advantage over other market participants.
Efficient market
This means that orders are executed and transactions
are settled in the fastest possible way.
Doing business
People who buy or sell stock on an exchange do so
through a broker.
The broker takes your order to the floor of the exchange looks
for a broker representing someone wanting to buy/sell. If a
mutually agreeable price is found the trade is made
Transparency
• Investor makes informed and intelligent decision about
the particular stock based on information.
• Listed companies must disclose information in timely,
complete and accurate manner to the Exchange and the
public on a regular basis.
• Required information include stock price, corporate
conditions and developments dividend, mergers and joint
ventures, and management changes etc.
LISTING REQUIREMENTS
Listing requirements are the set of conditions imposed by a
given stock exchange upon companies that want to be listed
on that exchange. Such conditions sometimes include
minimum number of shares outstanding, minimum market
capitalization, and minimum annual income.
For Fees –
Initial Listing Fee:
1/10 of 1% of the paid-up capital (subject to a maximum of Rs.
1.5 million.
LISTED SECTORS
OPEN-END-MUTUAL FUNDS 0
CLOSED-END-MUTUAL FUNDS 23
MODARABAS 34
LEASING COMPANIES 18
INVESTMENT BANKS/COS./SECURITIES 31
COMMERCIAL BANKS 27
INSURANCE 39
TEXTILE SPINNING 107
TEXTILE WEAVING 18
TEXTILE COMPOSITE 36
WOOLEN 06
SYNTHETIC and RAYON 19
JUTE 06
SUGAR and ALLIED INDUSTRIES 41
CEMENT 24
TOBACCO 04
REFINERY 04
POWER GENERATION and DISTRIBUTION 13
OIL and GAS MARKETING COMPANIES 08
OIL and GAS EXPLORATION COMPANIES 05
ENGINEERING 13
AUTOMOBILE ASSEMBLER 14
AUTOMOBILE PARTS and ACCESSORIES 13
CABLE and ELECTRICAL GOODS 10
TRANSPORT 08
TECHNOLOGY and COMMUNICATION 11
FERTILIZER 06
PHARMACEUTICALS 09
CHEMICALS 26
PAPER and BOARD 10
VANASPATI and ALLIED INDUSTRIES 10
LEATHER and TANNERIES 06
FOOD and PERSONAL CARE-PRUDUCTS 24
GLASS and CERAMICS 12
MISCELLANEOUS 26
BONDS 38
FUTURE CONTRACTS 46
STOCK INDEX FUTURE CONTRACTS 105
Total 869
Deliverable Futures:
Forward contracts to buy or sell a certain underlying
instrument with actual delivery of the underlying instrument
occurring. Settlement occurs 30 days after the contract is
purchased.
- CFS(discontinued)
- COT (discontinued)
Company Services
• Customized services and state-of-the-art technology
infrastructure, have given us an edge over other
exchanges in the region.
• Fully automated trading, clearing and settlement system.
• Internet routed trading facility.
• Gateway trading (Order Management System).
• Investors and fund managers can also access information
through Display Only Terminal
• Internet trading facilities available.
• Order-driven system .
Data Services:
• TV channels also display KSE ticker through live feeds
from KSE system.
• Investors provided customized data packages for trading
and assessment of their portfolio on a real time basis.
• Data feed provided to major international redistributors
(Reuters, Bloomberg) on real time basis.
• KSE website offers data of market on real time basis,
including listed company profiles, snap shot of financials,
press releases and summary of market activities on real
time basis.
REFERENCES
o http://www.kse.com.pk/
o http://www.kse.com.pk/
o http://en.wikipedia.org/wiki/Karachi_Stock_Exchange
o http://www.advfn.com/StockExchanges/about/KSE/Ka
rachiStockExchange.html
o http://www.economywatch.com/stockexchanges/kara
chi.html
o http://karachistockmarket.blogsome.com/
o http://thecurrentaffairs.com/index.php/bull-run-
continues-at-karachi-stock-exchange/