Karachi Stock Exchange

Fatima Jinnah Women university

Final project

Karachi stock exchange

Submitted to:

Maam Nadia Jamil Submitted by:

Saira Gulzar Ayesha Tahir Khan Bushra Tabassum

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ACKNOWLEDGEMENT All praises and thanks to Almighty Allah. The lord and creator of this universe by whose power and glory all good things are accomplished. He is also the most merciful, who bestowed on us the potential, ability and an opportunity to work on this report. We owe our profoundest thanks to our teacher Maam Nadia Jamil we feel solely blessed to have her as our teacher, whose strength and wisdom we learn up to and no doubt, experience of work with her is far better than we believed possible. We appreciate his way of teaching, explaining and guiding the students. She really has an art to get maximum for students without making them feel what he got from them. She is really a source of inspiration for us and for every student of our class.

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Table of contents

 Karachi stock exchange………………………………………….  Vision  Mission  Market index  KSE 1oo index  Clearing and settlement system  Security deposit and clearing companies  Brokers of KSE  Types of markets  Bond market  Physical market  Forex market  References

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Definition of Stock Exchange 5

“An association of stockbrokers who meet to buy and sell stocks and bonds according to fixed regulations.”

Karachi Stock Exchange

• Karachi stock exchange was established on 18 September 1947. • The Karachi stock exchange is the biggest and most liquid exchange of Pakistan •

and has been declared as the best performing stock market of the world for the year 2002. The Karachi Stock Exchange or KSE is a stock exchange located in Karachi, Sindh, Pakistan. it is Pakistan's largest and oldest stock exchange, with many Pakistani as well as overseas listings. Its current premises are situated on Stock Exchange Road, in the heart of Karachi's Business District.

Vision of Karachi Stock Exchange “To be a leadung financial institution, offering efficient, fair and transparent securities in the market and enjoying full confidence of the investors.”

Mission of KSE • • • •

To strive and provide quality and value added services to capital market in an efficient, transparent and orderly manner: compatible with international standards and best practices. To provide state of the art technology and automated trading operations driven by a team of professionals in accordance with good corporate governance. To protect and safeguard the interest of all its stockholders, i.e. member listed companies, employees and ivestors at large, and To reflect country’s ecinomic health and behavior and play its role for the growth, development and prosperity of Pakistan.

Market Indices “A stock market index is a method of measuring a section of the stock market.” • • •

KSE began with a 50 shares index. As the market grew a representative index was needed. On November 1, 1991 the KSE-100 was introduced and remains to this date the most generally accepted measure of the Exchange. The KSE-100 is a capital weighted index and consists of 100 companies representing about 90 percent of market capitalization of the Exchange.

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KSE 100 Index “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.” In determining representative compaines to compute the index on, companies with the highest market capitalization are selected. However, to ensure full market representation, the company with the highest market capitalization from each sector is also included.

Top 30 KSE 100 Index Companies The following is a list of 30 companies with the highest market capitalization volume and their respective weightages in the index and account for over 80% of the KSE index as of February 20, 2008: Number Company Name

Weightage (%) Market Capitalization (PKR)

1

OGDCL

14.14

550,948,930,000

2

MCB

7.17

279,583,150,000

3

National Bank of Pakistan

5.43

211,726,900,000

4

Pakistan Petroleum

5.06

197,201,080,000

5

Standard Chartered Bank

4.41

171,704,800,000

6

PTCL

4.28

166,810,800,000

7

United Bank Limited

4.13

161,025,160,000

8

Jahangir Siddiqui & Company 2.66

103,600,000,000

9

Pakistan State Oil

2.08

81,034,440,000

10

Allied Bank Limited

2.01

78,371,670,000

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Nestlé Pakistan

1.93

75,280,250,000

12

Pakistan Oilfields

1.71

66,824,220,000

13

Fauji Fertilizer Company

1.68

65,607,390,000

14

ABN AMRO

1.63

63,666,370,000.

15

Engro Chemical

1.45

56,492,990,000

16

Arif Habib Securities

1.40

54,660,000,000

17

NIB Bank

1.27

49,320,250,000

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18

Kot Addu Power Company

1.19

46,565,400,000

19

EFU General Insurance

1.16

45,300,000,000

20

Bank of Punjab

1.13

43,869,030,000

21

Fauji Fertilizer Bin Qasim

1.06

41,474,480,000

22

Bank Alfalah

1.03

39,975,000,000

23

Adamjee Insurance

1.01

39,258,300,000

24

Pakistan Tobacco Company

0.99

38,707,280,000

25

Sui Northern Gas Pipelines

0.98

38,300,100,000

26

Hub Power Company

0.98

38,128,240,000

27

Dawood Hercules Chemicals

0.91

35,549,620,000

28

Habib Metropolitan Bank

0.91

35,354,280,000

29

EFU Life Assurance

0.89

34,750,000,000

30

Lucky Cement

0.86

33,593,480,000

Clearing and Settlement Procedure Trading System The KSE has introduced as state of the art computerized trading system known as Karachi automated trading system to provide a fair , transparent an deficient and cost effective market for the investors. The trading is divided into four distinct segments, each of which has its own clearing and settlement procedure. These are    

T+3 Provisionally listed companies Spot (T+1) Transactions and future contrasts

T + 3 Counters Transactions in this segment are settled through the clearing and settlement? NNCPL that nets out the purchases and sales and the financial obligations theory of each member/firm for the notified clearing period. Payment from and to members are routed through the

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clearing & settlement/ NNCPL. For the securities declared eligible securities by the central depositary company the clearing and settlement takes place through NNCPL in order to handle the clearing of all the three stock exchanges of the county under one roof, the national clearing and settlement system has been introduced. NNCPL is managed by central depositary company of Pakistan limited. Futures Trading in Provisionally Listed Companies The shares of companies which make a minimum public offering of Rs.150 million are traded on this segment from the date of publication of offering documents. The period of contracts of each script is notified by the exchange. The outstanding contracts carried out under the provisionally listed companies are settled on the settlement date and members are not allowed to transfer their positions to the ready clearing board or any other board. On formal listing, the trading in the shares of the company is shifted to the ready board counter under T+ 3 settlement system from the dates of normal listing. Spot / T+1 Transaction For about 5 days before the closure of shares transfer book notified by the company for any corporate action, transactions are settled on T+ 1 basis. For non-CDC securities the delivery and payment is settled through the clearing house of the exchange, however, delivery is tendered directly between the buying and selling members as per the instructions of the clearing house, however the delivery is tendered directly between the buying and selling members as per the instructions of the clearing 7 settlement. The transactions in CDC eligible securities are settled through NCCPL. Future Contracts A future contract involves purchase and sale of securities at some future date (normally within one calendar month) at a price foxed today. The number and names of companies to be traded on the futures counter are determined every six months based on the eligibility criteria approved by SECP in this regard ad which are notified to the market participants in advance. Under the regulations governing future contracts and the contract is fixed for a period of one month transaction costs. Brokerage on transactions is freely negotiable between the negotiator and the client. Stamp duty is charged at 1.5% of the face value of the shares under the physical form of transfer. There is no stamp duty for transfer settled through the central depositary system; however, there is a one time stamp duty at the rate of one paisa per share at the time of deposit of securities in the CDS. The stamp duty is born by the buyer ad the seller.

Security Deposit and Clearing Companies Central Depositary Company of Pakistan

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The transformation of physical settlement to online real-time book-entry of the securities through Central Depositary System has been achieved. This has eliminated the chances of forgery, fraud and delay in transfer. Around 97% of the settlement is routed through CDS. The elimination of hassles of physical settlement has been the most important reason for the phenomenal rise in trading values and volumes. National Clearing and Settlement System (NCSS) NCSS is an electronic system developed to replace the individual clearing houses of Pakistan’s three stock exchanges by a single entity. This system is operated by national clearing company of Pakistan limited (NNCPL), which has been registered as a seoerate legal entity. The operations of NCSS are rapidly gaining momentum and so far a majority of the securities have been introduced into the system for settlement purpose. NCSS provide stability to the market by capping the systematic risk to a good extent. It has also improved efficiency of the settlement process by introducing a consolidated and geographical neutral clearing and settlement system, NCS with its technologically advanced features such as automated Pay and collect functionality, introduced extraordinary transparency and efficiency in the clearing process. Both CDS and NCSS are managed by separate companies and associated concerns of KSE.

BROKERS IN KSE A stockbroker is a regulated professional who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors. A. REHMAN H. ABDULLA DURVESH 713, Stock Exchange Building, Stock Exchange Road Ph.# 2416059-2419848 ABDUL MAJEED ZAKARIA Room No.17, Ground Floor, New Bldg. Karachi Stock Exchange Ph.# 2428186-2428184-2428185 ABDUL RASHID JAN MOHD. DAWOOD 401-Uni Towers, I.I.Chundrigar Road Ph.# 2413445-2412265 AKD SECURITIES & SAFE DEPOSIT CO. LTD. 611, Clifton Centre, Kehkashan, Block-8, Clifton Ph.# 5863810-5863801 Fax# 5872206 ALFA ADHI CAPITAL MANAGEMENT (PVT) LTD. 83, Old Stock Exchange Bldg., Stock Exchange Road Ph.# 2429334-2419668-2422550 Fax# 2425669 ALIHUSSAIN RAJAB ALI 4-5, Stock Exchange Building, Stock Exchange Road Ph.# 2415076-2416015

ABA ALI HABIB SECURITIES 419-A, Stock Exchange Building, I.I.Chundrigar Road Ph.# 2417674-2412491-2415631-2429666 ABDUL RASHID JAN MOHAMMAD 401-Unitower, I.I.Chundrigar Road Ph.# 2412266-2412265-2410427 Fax# 2416791 ABDUL REHMAN H. ABDULLA DURVESH 713-Stock Exchange Building, Stock Exchange Road Ph.# 2419848-2416059-2417707 AL-MAL SECURITIES & SERVICES LTD. 10th Floor, Progressive Square, Block-6, Shahrah-eFaisal, PECHS Ph.# 4547525-4547521-4547522-4547523 ALI HASNAIN YUSUF ALI Rm 84, 2nd Fl. Stock Exch.Bldg., Stock Exchange Road Ph.# 2428490-2428488-2441101-2441100

AMIN SIDDIQUE PAREKH 81, Karachi Stock Exchange Bldg, Karachi Stock Exchange Road Ph.# 2410391-2422914 ARIF HABIB SECURITIES LTD. ASIAN STOCKS FUND LIMITED 60-63,S tock Exchange Building, Stock Exchange Road 302, Clifton Centre, Main Clifton Road Ph.# 2415215-2415213-2415214-2427050 Ph.# 5863565-5863561-5863563-5863562 ASK SECURITIES (PVT) LTD. BARINGS SECURITIES PAKISTAN (PVT) LTD. 301-A, 3rd Floor, Lakson Square, 265 R.A.Lines, Sarwar 15th Floor PNSC Building Shaheed Rd. M.T.Khan Road Ph.# 5684179-5689897 Ph.# 5610568-5610565-5610579-5610570 Fax# 5684018

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C & K MANAGEMENT ASSOCIATES (PVT) LTD.

CARR MASHRIQ (PVT) LTD. B-904, Lakson Square Building-3, 254, Sarwar Shaheed Road, Saddar Ph.# 5676119-5676116 Ph.# 5685930-5687839 Fax# 5682578 CENTRAL DEPOSITORY COMPANY CORPORATE VENTURE PARTNERS 8th Flr, Karachi Stock Exchange, Off Chundrigar Road 603, 6th Floor, Clifton Centre, Bloc-5, Khayaban-ePh.# 2416774 Roomi, Clifton Fax# 2426271 Ph.# 5872486-5872576-5872510-5871805 DAWOOD JAN MUHAMMAD EASTERN CAPITAL LTD. Room #714, Stock Exchange Bldg., I.I. Chundrigar Road 609-612, Clifton Centre, Clifton Ph.# 2411571-2411656-2414214 Ph.# 5863801-5863802-5863803-5863808 Fax# 2418685 FAWAD YUSUF SECURITIES (PVT) LTD. FIRST CAPITAL ABN AMRO EQUITIES (PAKISTAN) 79, Old Stock Exchange Building, Stock Exchange Road Room 610, Stock Exchange Bldg. Ph.# 2444554-2438915-2428603 Ph.# 2444461-2444458-2444459-2444460 Fax# 2428464 FORTUNE SECURITIES LTD. H. HATIM H. KARIM 712-Stock Exchange Building, Stock Exchange Road 111-D, 22/6, Nazimabad Ph.# 2444232-2444228-2444229-2444230 Ph.# 2415869-2415861-2413732-2415862 H.P. BYRAMJI & SONS HAJI GHANI HAJI USMAN 162-M.A.Jinnah Road, Near Denso Hall, Saddar 18-Stock Exchange Building, Stock Exchange Road Ph.# 2436119-2434436-2433108 Ph.# 2412164-2412161 HAJI HAROON KAPADIA 631-633,Stock Exchange Bldg., Off:I.I.Chundrigar Road Ph.# 2410448-2410448-2430461-2432365 404,Trade Tower, Abdullah Harron Road

Here is a list of leading 13 of the 88 brokers who have been named, in the forensic report as having profited from the ‘situation’: • • • • • • • • • • • • •

Atlas Investments AKD Securities BMA Securities Arif Habib Orix Investment Bank KASB Taurus Securities Abdul Jabbar Khanani Escort Investments Jehangir Siddiqui Akbar Ali Cassim and Sons Motiwala Securities Elixir Investments

Types of markets: There are a wide variety of markets in which one can invest money. •

Bonds,

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Forex,

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Derivatives

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Physical Assets.

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Stock Market

Stock Market Most familiar to the average investor is the stock market. This market allows investors to buy and sell shares of ownership in publicly traded companies. Money is made in this market in two main ways. •

The first is through capital gain, in which the value of each share increases in value.

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The other is through dividends, in which companies pass on income to investors.

Bond Market •

The bond market (also known as the debt, credit, or fixed income market) is a financial market where participants buy and sell debt securities, usually in the form of bonds.The debt issuers then make regular payments to debt holders in the form of coupon payments and, once the debt matures, pay back the principal on the debt. The most common type of financial instruments issued in this market are bonds, bills, notes and certificates of deposit. There are also more exotic types of debt including mortgage-backed securities and collateralized debt obligations.

Forex Market •

The forex market allows investors to speculate on changes in the exchange rates between currencies. Investors will purchase one currency by selling another in the hope that the currency they purchased goes up in value compared to the one they sold. In this market, because the moves between currencies are generally small and investments are shorter term, a lot of leverage is used. Some forex brokers allow leverage as high as 500:1, which means that you can control $500 for every $1 you invest.

Physical Assets Market •

The investment in physical assets is essentially the purchase of assets such as metals, jewelry, real estate, cattle and much more. In this market, investors hope that the price for which they can sell an asset is more than what they paid for it. The risks and costs associated with this type of investment will differ with each type of physical asset. For example, there can be holding fees on gold; if you own 12

cattle, •

the

cost

of caring

for

them

is

considerable.

The last major type of investment is an expansion of all of the above types of markets. Derivatives are securities that derive their value from an underlying asset such as a stock, interest rate, currency or physical asset. Investors in these types of securities can go long or short on the underlying asset and can purchase either the right or obligation to purchase or sell it. As the value of the underlying asset changes, the value of the derivative changes as well. The major types of derivatives are options, futures and forwards.

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