Pakistan Stock Exchange(PSX)

Hinweis der Redaktion

1. Stock exchange (intro) • Organized and regulated financial market where securities (bonds, notes, shares) are bought and sold at prices governed by the forces of demand and supply
2. Tentative objectives • Establishment of stock exchange in Pakistan • Why we need stock exchanges (features & role) • Why we have to invest in stock exchange (advantages) • Rules of traders and members in stock exchange • Procedure of investment and trading (through S.E) • What factors we have in mind to investtrade in S.E • Weather stock exchanges indicates economies of developing countries like Pakistan • Advantage to invest in Pakistan stock exchange
3. History of stock exchange in Pakistan: - Karachi stock exchange: - • KSE was established on September 18, 1947. It was incorporated on March 10, 1949 • Only five companies were initially listed with a total paid-up capital of 37 million rupees. • .The first index introduced in KSE was based on fifty companies and was called KSE 50 index. • Computerized trading system called KarachiAutomatedTrading System (KATS) was introduced in 2002
4. Continues… Lahore stock exchange • In 1970, Established under the Exchange Ordinance of 1969 by the Government of Pakistan • In response to the needs of the provincial metropolis of the province of Punjab. • It initially had 83 members and was housed in a rented building in the crowded Bank Square area of Lahore • The LSE was the first stock exchange in Pakistan to use the internet.
5. Continues… Islamabad stock exchange: - • Established in Islamabad, the capital city of Pakistan on October 25, 1989 • To cater to the needs of less developed areas of the northern part of Pakistan • It was licensed as a stock exchange on January 7, 1992 Pakistan stock exchange • All these three exchanges had separate management, trading interfaces, indexes, listing criteria etc.
6. Continues… • This structure inherently created conflict of interest and perceived to jeopardize the investors' interest • Therefore, the Stock Exchanges Act, 2012 (known as "Demutualization Act") was promulgated by the Government. As a result, three exchanges were merged together to form a new combined exchange called Pakistan • As on October 7th, 2016 there are 576 companies listed in PSX and the total market capitalization is Rs. 8,384.864 billion.
7. Information Interesting information A stock index or stock market index is a measurement of the value of a section of the stock market. It is computed from the prices of selected stocks (typically a weighted average). It is a tool used by investors and financial managers to describe the market, and to compare the return on specific investments.
8. Indexes in Pakistan stock exchange A.KSE 100 index B. KSE all share index C. KSE 30 index D.KMI 30 index E. PSX-KMI all share index
9. Stock exchange and capital market Introduction Capital market is a broader term that includes the stock market and other venues for trading financial products. The stock market allows investors and banking institutions to trade stocks, either publicly or privately. Stocks are financial instruments that represent partial ownership of a company. • Only secondary securities are traded in stock exchange • Capital market consist of both primary and secondary market
10. Instrument use in stock exchange • Stock issued by listed companies Shares Securities • Unit trusts A trust formed to manage a portfolio of stock exchange securities Small investors can buy units
11. Instrument use in stock exchange • Derivatives something which is based on another source. • Types Forward contract Future contract Option contracts Swaps
12. Instrument use in stock exchange • Pooled investment products A “pooled fund” is a unit trust in which investors contribute funds that are then invested, or managed, by a third party. A pooled fund operates like a mutual fund, but is not required to have a prospectus under securities law. • Bonds A bond is a debt instrument in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed rate.
13. Instrument use in stock exchange • Types of bonds • Treasury bonds. Other government bonds. ... • Investment-grade corporate bonds. ... • Foreign bonds. ... • Mortgage-backed bonds. ... • Municipal bonds.
14. Features • Organized market • Regular market (9:00 a.m - 5:15 p.m) • Clearing house • Second hand securities • Listed securities • Information media • Speculation • Contribution toward economic development
15. Role • Common forms of capital raising • Going public • Limited partnerships • Venture capital • Corporate partners • Mobilizing savings for investment
16. Continues.. • Facilitating company growth • Profit sharing • Corporate governance • Creating investment opportunities for small investors • Government capital-raising for development projects • Barometer of the economy
17. Importance (investment point of view): - • Following is the answer why we have to invest in stock exchange • Security • Liquidity • Profit Dividend Market fluctuation • Tax relief
18. Types of investment in stock exchange Buy and Hold"Trading: This is the passive approach used by many individual investors when they trade stocks or buy stocks online You choose a stock which you hope will go up in price and/or pays an attractive dividend. (to hold)
19. Continues… Active StockTrading: • To maximize their opportunities and minimize their losses. • You don’t execute stock trades every day, but you monitor your holdings frequently and make adjustments where appropriate in your portfolio. DayTrading: • to devote a little time each day in return for the potential of regular income • where they can quickly open and close a position.
20. Factors that Affect stock prices ECONOMIC FACTORS: • Interest rates • Exchange rates • Income or GDP • Inflation & deflation FIRM-SPECIFIC FACTORS/FIRM FUNDAMENTALS: • Expected +NPV investments • Dividend policy changes • Significant debt level changes
21. Continues… • Stock offerings and repurchases • Earnings surprises • Acquisitions and divestitures/divestment (a strategy to remove some of a group's assets under its current business portfolio) MARKET-RELATED FACTORS: • January effect – general increase in stock price in January • Noise trading • Trends
22. MEMBERS AGENTS ANDTRADERS (ELIGIBILITY STANDARDS) RULES, 2001 Agent • means a person appointed by a member of a Stock Exchange to act on his behalf for the purpose recognized by a stock exchange and includes a sub- broker or head of a branch office. Trader • means an employee of a member who is authorized by such member to execute trade of the investors through the automated trading system in such exchange.
23. Continues.. Eligibility criteria • is not less than 21 years of age; • is a citizen of Pakistan; • is not a lunatic or a person of unsound mind; • has not been convicted of any offence involving fraud or breach of trust; • has not been removed as an agent by a member of a stock exchange for fraud or breach of trust and furnish a certificate of that effect from his previous employee;
24. Continues.. • has at least passed graduation or equivalent examination from an institution recognized by the Government: Provided that the Commission may relax the educational qualification on merits having regard to the applicant’s experience; • has attended a course for the agents prescribed by the stock exchange and approved by the Commission; • has at least two years experience in a related field such as banking, accountancy or in a broker’s office; • has faithfully complied with all general and specific directives of the Commission; • in the case of partnership a firm or a body corporate, the partners or directors, as the case may be, shall comply with the requirements contained in clause (i).
25. Procedure of investment and trade in stock exchange: - • A person who has saved money and want to invest it called investor. • Investor select a broker on which he believes that giver proper and timely information to him. (broker is reg. member of stock exchange) • Next step is to open account with broker. • Than investor has to select order
26. Continues… • Next step is to place the order to broker.
27. • Broker further refer the order to market specialist who deals with that stock. • Specialist will execute the order in best possible price available. (normally)
28.  Lastly shares or money transfers to the investors account opened with the broker.
29. Advantages of investing in PSX (Domestic) • High rate of returns • Easy procedure to get registered ( less legitimations) • Not saturated • Price fluctuations can lead to more money • No exchange rate risk • Ease of research
30. Advantages of investing in FOREX Demerits of domestic exchange (PSX) • Stable prices • Strong portfolio • Large opportunity (types of stocks) • 24-Hour Market Action
31. The Stock Market and the Economy in Pakistan • Published: The Pakistan Development Review 40: 2 (Summer 2001) pp. • Variables: Independent: - stock market Dependent variable: - Consumption Expenditures, Investment, Spending, GDP etc.
32. Conclusion • The purpose of the paper is to re-examine the causal relationship between stock prices and macro variables, consumption expenditures, investment spending, and GDP, in Pakistan • We use annual data from 1959-60 to 1998-1999 • The correlation analysis shows low correlations between stock prices and macro variables • However, there is evidence of significant increase in these correlations in the period subject to reforms • indicates the presence of a long-run relationship between stock prices and macro variables
33. Our conclusion • From above discussion we conclude that stock exchange is a tool to transfer money to those who want to invest it in productive way. We also observe that stock exchange necessary from both individual (investor) point of view as well as for countries’ economy, but one should have to take care of some aspects for trading in stock market • And we see that there is correlation between stock market and macroeconomic factors, and its going stronger with passage of time in Pakistan that’s why we can say that stock market is indicator of courtiers’ economy even in developing countries