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Security analysis and portfolio management

Report on the relationship of stock prices with Economic indicators of Automobile industry
Group members  Muhammad Irfan  Hina Mubeen  Aqeela Tariq  Masham Zehra Rizvi  Najma Malik Roll No: 51 Roll No: 29 Roll No: 09 Roll No: 40 Roll No: 04 Section A, MBA3 Section A, MBA3 Section A, MBA3 Section B, MBA3 Section B, MBA3

Submitted to: Sir Nadeem Araien
Finance report: | Federal Urdu university Gulshan campus Karachi

Finance report: | Federal Urdu university Gulshan campus Karachi .HUMDULILLAH! Would that we have words to pay tribute to our loving Parents and teachers whose invaluable prays salutary admire and embodying attitude kept our spirit alive to strive for Knowledge and integrity which enable us to reach milestone We would also like to express enormous gratitude to our Respectable teacher “Sir Nadeem Araien” For providing the direction for this project and for helping us in refining our effort and ideas we also acknowledge the help and Pleasant gathering of all our class fellows we are also thankful to all of those people who helped us in accomplishing our project.2 Security analysis and portfolio management Acknowledgement First of all we would like to thank that Great entity that helped us to get through this report safely. the one who was always there when no one was! SHUKER.ALL.

Gross domestic product 2. KSE 100 Index 7. Foreign direct investment. Conclusion 12. Data of Economic Indicators 9. Automobile Industry ( Company’s profiles) 8.interest rate spread 4. Stock prices of Auto mobile Companies 10. net (Bop. current US$) 5. Gross national product 3. Pakistan . References Finance report: | Federal Urdu university Gulshan campus Karachi . Foreign Reserves 6.3 Security analysis and portfolio management Table of contents 1. Correlation among Stock prices of companies & Economic indicators 11.

which is one of the factors economists use to determine whether an economy is in a recession. both measures should arrive at roughly the same total. investment. which in turn means lower stock prices.Gross domestic product/Growth rate: The gross domestic product (GDP) is one of the primary indicators used to gauge the health of a country's economy. As one can imagine. Finance report: | Federal Urdu university Gulshan campus Karachi . A significant change in GDP. For example. It represents the total dollar value of all goods and services produced over a specific time period . is calculated by adding up total compensation to employees. Measuring GDP is complicated (which is why we leave it to the economists). Investors really worry about negative GDP growth. GDP is expressed as a comparison to the previous quarter or year. gross profits for incorporated and non incorporated firms. Logically. if the year-to-year GDP is up 3%. For example. It's not hard to understand why: a bad economy usually means lower profits for companies. the calculation can be done in one of two ways: either by adding up what everyone earned in a year (income approach). economic production and growth. Usually. which is sometimes referred to as GDP (I). and taxes less any subsidies The expenditure method is the more common approach and is calculated by adding total consumption. but at its most basic. when the economy is healthy. this is thought to mean that the economy has grown by 3% over the last year. you will typically see low unemployment and wage increases as businesses demand labor to meet the growing economy. what GDP represents. The income approach. whether up or down.you can think of it as the size of the economy. government spending and net exports. has a large impact on nearly everyone within that economy. usually has a significant effect on the stock market.4 Security analysis and portfolio management Introduction of Indicators: 1. or by adding up what everyone spent (expenditure method).

is usually converted to U.S. since it is the standard used in international guidelines for economic accounting. Its rise or fall measures economic activity based on the labor and production output within a country. GNI (formerly GNP) is the sum of value added by all resident producers plus any product taxes (less subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad.S. calculated in national currency. It excludes such factors as income earned by U.S. furniture. although an alternative rate is used when the official exchange rate is judged to diverge by an exceptionally large margin from the rate actually applied in international transactions. a special Atlas method of conversion is used by the World Bank. The figures used to assemble data include the manufacture of tangible goods such as cars.7% (2010 est. and auto repair.5 Security analysis and portfolio management GDP .real growth rate: 2. but does include factors such as the rental value of owner-occupied housing.6% (2008 EST. and bread. This figure facilitates comparisons between the United States and other countries.) 3. and the provision of services used in daily living such as education. dollars at official exchange rates for comparisons across economies. Data are in current U. In December 1991. This applies a conversion factor that averages the exchange rate for a given year and the two preceding years. dollars. The Gross Domestic Product (GDP) measures output generated through production by labor and property which is physically located within the confines of a country. the Bureau of Economic Analysis began using the GDP rather than the GNP as the primary measure of United States production. adjusted for Finance report: | Federal Urdu university Gulshan campus Karachi . GNI.) 4. The GNP does include allowances for depreciation and indirect business taxes such as those on sales and property. health care.3% (2009 est. To smooth fluctuations in prices and exchange rates.) 2. Atlas method (current US$): The Gross National Product (GNP) is the total dollar value of all final goods and services produced for consumption in society during a particular time period.Gross national product/ GNI. citizens working overseas. Intermediate services used in the production of the final product are not separated since they are reflected in the final price of the goods or service.

net (Bop. and job opportunities. Foreign direct investment is net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of Finance report: | Federal Urdu university Gulshan campus Karachi . dollars. Data are in current U. GNI (formerly GNP) is the sum of value added by all resident producers plus any product taxes (less subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad. the net interest spread is like a profit margin. Philippines. the G-5 countries (France.Interest rate spread (lending rate. Japan. the United Kingdom. %): Interest rate spread is the interest rate charged by banks on loans to prime customers minus the interest rate paid by commercial or similar banks for demand. and the United States. The greater the spread. and through 2000. The net interest rate spread is a key determinant of a financial institution’s profitability (or lack thereof). 3.Foreign direct investment. While the federal funds rate plays a large role in determining the rate at which an institution lends immediate funds. 4. in addition to an increase in the transfer of skills. Germany. open market activities ultimately shape the rate spread. the more profitable the financial institution is likely to be. technology. current US$): FDI provides an inflow of foreign capital and funds. or savings deposits. In simple terms. time. The Commitment to Development Index ranks the "development-friendliness" of rich country investment policies. Japan. and Singapore benefited from investment abroad. the United Kingdom. these countries include the Euro area. From 2001. and the United States). The difference between the average yield a financial institution receives from loans and other interest-accruing activities and the average rate it pays on deposits and borrowings. the less profitable the institution is likely to be.S.6 Security analysis and portfolio management differences in rates of inflation between the country. Many of the East Asian tigers such as China. South Korea. the lower the spread. A recent meta-analysis of the effects of foreign direct investment on local firms in developing and transition countries suggest that foreign investment robustly increases local productivity growth.

S. 5. The stock market capitalisation of listed companies in Pakistan was valued at $5. but it is more accurately termed official international reserves or international reserves.000 points. dollars. The index was launched in late 1991 with a base of 1. reinvestment of earnings. It is the sum of equity capital. and to a lesser extent the euro. the local currency issued. Pakistan's KSE 100 Index was the bestperforming stock market index in the world as declared by the international magazine “Business Week”.937 million in 2005 by the World Bank. and short-term capital as shown in the balance of payments.Foreign Reserves: Foreign reserves (also called Forex reserves or FX reserves) in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities. by the government or financial institutions. Data are in current U. it had grown to 1. uncertain political environment. However. By 2001. and mounting inflation and current account deficits resulted in the steep decline of the Karachi Stock Exchange.7 Security analysis and portfolio management the investor. and the Japanese yen. the corporate sector of Pakistan has declined dramatically in recent times Karachi Stock Exchange 100 Index (KSE-100 Index) is a stock index acting as a benchmark to compare prices on the Karachi Stock Exchange (KSE) over a period of time. the company with the highest market capitalization from each sector is also included. that is. after the General Elections. and used to back its liabilities. and the various bank reserves deposited with the central bank. net FDI in the reporting economy from foreign sources less net FDI by the reporting economy to the rest of the world.Karachi Stock Exchange: In the first four years of the twenty-first century. the term in popular usage commonly includes foreign exchange and gold. to ensure full market representation. 6. the UK pound.770 Finance report: | Federal Urdu university Gulshan campus Karachi . SDRs and IMF reserve positions. e. This broader figure is more readily available. other long-term capital. In determining representative companies to compute the index on. As a result. But in 2008. This series shows total net. rising militancy along western borders of the country. However. These are assets of the central bank held in different reserve currencies. mostly the US dollar. companies with the highest market capitalization are selected.g.

Japan.500 (citation needed) in April. The index recovered quickly in 2008. Pak Suzuki is pioneer in Automobile Business having the most modern and the largest manufacturing facilities in Pakistan with an Annual production capacity of 150. Service and Spare Parts) facilities across Pakistan. 4. small vans. by November 22. Pak Suzuki always endeavors to go aggressively for the sound Finance report: | Federal Urdu university Gulshan campus Karachi . Caring for the Environment Pak Suzuki was pioneer in introduction of Factory fitted CNG vehicles. it had skyrocketed to 9. The Company was incorporated as a public limited company in August 1983 and started commercial operations in January 1984.187. By 2005. Cargo vans and Motorcycle. 2. 2007. Suzuki vehicles have a healthy local content upto 72%. 2008 during the global financial crisis of 2008 it had fallen to 9. a day before the assassination of former Prime Minister Benazir Bhutto. Pak Suzuki Motor Company Limited was formed as a joint venture between Pakistan Automobile Corporation and Suzuki Motor Corporation (SMC) . Automobile industry: 1. Pak Suzuki Motors Co. Atlas Honda Ltd. However. KSE-100 index touched the highest ever benchmark of 14.285 in February 2007.8 Security analysis and portfolio management points. It then reached a peak of 12. Following the aggressive policy of Indigenization. Pak Suzuki has the largest Dealers network offering 3S (Sales.814 points on December 26. Hino Pak motors Ltd. This was made possible by strong support of our vendors. Pak Suzuki holds more than 50% Market Share.000 vehicles.09%. 3. Pickups. when the index nosedived. Millat tractors Ltd. The initial share holding of SMC was 12. reaching new highs near 15. The vehicles produced include cars.989 points.5% which was gradually increased to 73. Ltd.

Hino Motors Ltd. Liana and components to Bangladesh and Europe thus earning precious foreign exchange for the country. Hino Motors Japan and Toyota Tsusho Corporation in collaboration with Al-Futtaim Group of UAE and PACO Pakistan formed Hinopak Motors Limited in 1986. industrialization and creating job opportunities thus improving the people’s living standards with the combined efforts of all the dealers..9 Security analysis and portfolio management development of the society by increasing motorization. In 1998. and Toyota Tsusho Corporation obtained majority shareholding in Finance report: | Federal Urdu university Gulshan campus Karachi . vendors and Pak Suzuki employees. Pak Suzuki is also exporting Suzuki Ravi pickup.

By continuing to move forward and staying alert to the ever-changing market & social needs. The largest Manufacturer of Buses in Pakistan. Senator Pride. Hinopak’s Bus Line Up includes the Roadliner Supreme air-condition Super Luxury Bus. Hinopak is fully-equipped to design and manufacture a wide range of Bus Chassis and all types of Bus Bodies. Hinopak a vital contributor in saving of foreign exchange is also providing jobs and plays a pivotal role for the development of the local industry through its progressive manufacturing.Hinopak delivers only the safest most reliable products and remains the Pioneer in supplying the largest number of Urban Buses those are successfully facilitating the commuters of Punjab and Sindh. air-condition luxury coach and Rapidliner Deluxe Coach. This decision to invest in Hinopak at a time when the country's economy was passing through a depression and the sale of commercial vehicles was at an all time low reflects the confidence our Principals have in our company and their commitment to the Pakistani market.10 Security analysis and portfolio management the company after disinvestments by the other two founding sponsors. Hinopak’s Bus Line Up includes the Roadliner Supreme Luxury Bus for long journeys. Citiliner Intercity Buses. Citiliner Intercity Buses. Hinopak will continue to be a successful and respected corporate citizen of Pakistan.Hinopak is fully-equipped to design and manufacture a wide range of Bus Chassis and all types of Bus Bodies. reflecting their commitment and belief in the Hinopak corporate philosophy to "contribute to the development of a more prosperous and comfortable society by providing the world with a new set of values". Hinopak is the trusted market leader with over 65% share in the Pakistani Truck and Bus industry. Citiliner Urban Buses. Finance report: | Federal Urdu university Gulshan campus Karachi . Citiliner Urban Buses and the luxury Senator Coach and Rapidliner Deluxe Coaches.

These Tractors can be procured against Cash. A wide range of Agricultural Implements is also available like Chisel. Millat also ensures to provide prompt after-sales service to its valued customers through spread network of main and rural Finance report: | Federal Urdu university Gulshan campus Karachi .11 Security analysis and portfolio management A wide range of Massey Ferguson Tractors from 50 hp to 85 hp is available to cater to the needs of farmers. The biggest Spares Network ensures the availability of Genuine Parts. a wide range of Generating Sets 15 KVA to 40 KVA. Disc & Mould Board Plough. Lawn Mover. Tine Tillers. Forklift Trucks (3 ton) and Prime Movers (Power packs) from 50 hp to 85 hp. Ridger. Brief Specifications of each of the Tractors are available under Tractors. Post Hole Digger. Jib Crane. Front Blade. as well as through Bank Financing. and Pneumatic Pruning Set etc. Farm Trailer. In Industrial Products . Offset Disc Harrow. Multi-purpose Rear Blade. for the complete range of products throughout the country. Now HOLOGRAM SEAL backed by one year warranty ensures its genuineness. Agricultural Loader. Hydraulic Tipping Trailer. Also deals in range of Generating Sets from 27 kVA to 2000 kVA.

. The company was created by the merger of Panjdarya Limited and Atlas Autos Ltd.12 Security analysis and portfolio management workshops throughout the Country. In addition. Atlas Honda Limited (AHL) is a joint venture between the Atlas Group and Honda Motor Co. Ltd. Finance report: | Federal Urdu university Gulshan campus Karachi . Atlas Epak Ltd. Both these motorcycle manufacturing concerns were established by the Atlas Group. a third concern. was taken over by the Government of Bangladesh in 1971 after the fall of Dhaka. in 1988. Japan. Honda motorcycles are by far the largest selling motorcycles in the country with an unmatched reputation for high quality. reliability and after-sales-service. AHL manufactures and markets Honda motorcycles in collaboration with Honda Motor Company.

operates under the basic principles of "Respect for the individual" and "The Three Joys" . or coming into contact with our company. DATA & METHODOLOGY: the data is gathered from various web sites. GNP/GNI is in us billions $. trusting each other as equal partners in order to do our best in every situation. the Company has conducted its activities with a commitment to protecting the environment and enhancing safety in a mobile society. "The Three Joys" expresses our belief and desire that each person working in. "Respect for the individual" reflects our desire to respect the unique character and ability of each individual person. Based on the foundation of "Respect for the individual". should share a sense of joy through that experience. directly or through our products. Interest rate is related to lending & in % Finance report: | Federal Urdu university Gulshan campus Karachi . since its establishment AHL has remained on the leading edge by creating new value by providing products of the highest quality at a reasonable price for the customer's satisfaction. GDP is in growth rate % form. It is related to the time period of 2006 to 2010. In addition.commonly expressed as The Joy of Buying.13 Security analysis and portfolio management Atlas Honda Ltd. In line with these basic principles. The Joy of Selling and The Joy of Creating.

21 13.15 3. To analyses the relationship among the stock prices & economic indicators we use coefficient of correlation method.07 10040 14077 5885 9386 12022 Interest rate (lending $ rate)% FDI net Foreign Kse 100 index (close) (Bop us $ Reserves billions) (us billions) $ Stock prices of automobile industry: Year Pak Suzuki motors Co. 150 550 600 400 200 Ltd.70 169.32 10.14 15. Ltd.18 10.02 13. 150 130 90 300 400 80 140 140 100 100 Atlas Honda Finance report: | Federal Urdu university Gulshan campus Karachi .60 6.40 11.35 140.30 2.15 156. & compare the stock price of each year with each economic indicator.14 Security analysis and portfolio management form. foreign reserves data is collected from the board of investment Pakistan’s web site & are in us billion $ & KSE 100 index points are taken from the website of KSE 100 index & they are the points at the closing of year.33 11.83 12.30 126.96 14. 2006 2007 2008 2009 2010 250 300 50 100 100 Hinopak motors Milat tractors Ltd.13 5.70 4.78 146.60 5. Data of Economic indicators: Year GDP (growth rate)% GNI (atlas method) us billions 2006 2007 2008 2009 2010 6.39 3.52 5.23 16. We form two sets of variable taken the stock price of company & one economic indicator. FDI are net from Bop method & in us billions $.72 2.

06 0.13 0.com Finance report: | Federal Urdu university Gulshan campus Karachi .69 0. Ltd. Foreign reserves & KSE 100 Index points have moderate impact on the stock prices.finance. Milat tractors Ltd.gov.87 -0.05 0.indexmundi.29 0.answer.45 KSE 100 index 0.88 -0.4 -0. The correlation of each set of variable shows.72 -0. HinoPak motors Ltd.15 Security analysis and portfolio management Correlation among stock prices of companies & economic indicators: Companies GDP GNI Interest rate Pak Suzuki motors Co.68 0.02 0.com www.21 FDI Foreign reserves 0.3 0.investinpakistan. References: www.pk www.78 0.32 0.77 0.73 -0. Atlas Honda 0.27 0. There are many other factors contribute to the stock price of any company than just the economic indicators.pk www.03 0.boi.21 0.71 Conclusion: The objective of the study is to analyze the relationship among stock price & economic indicators.47 0. GDP & GNI has almost the same impact on the stock prices.35 0.gov.com www. the stock prices of companies is highly related to the FDI.

pk www.pk www.gov.boi.com www.gov.answer.com www. GDP & GNI has almost the same impact on the stock prices.investinpakistan. Foreign reserves & KSE 100 Index points have moderate impact on the stock prices.indexmundi. There are many other factors contribute to the stock price of any company than just the economic indicators. References: www.com Finance report: | Federal Urdu university Gulshan campus Karachi .16 Security analysis and portfolio management related to the FDI.finance.