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Problems Facing Karachi Stock Exchange
Chapter # 1
Introduction &
History
Page, 1
Problems Facing Karachi Stock Exchange
Problems Facing Karachi Stock Exchange
1.1 Definition
The Karachi Stock Exchange or KSE is a stock exchange
located in Karachi, Sindh, Pakistan. Founded in 1947, 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. It the oldest
and largest stock exchange in Pakistan. It was established in 1947, and has historically
been known for strong performance and high liquidity. However, the 2008 economic
crisis and political instability in Pakistan caused the Karachi Stock Exchange to drop by
more than a third between April and June 2008. See also: KSE 100 Index.
1.2 Introduction of 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”.
Karachi Stock Exchange (KSE) is the biggest and most liquid exchange in Pakistan with
the average daily turnover of 525.15 million shares and market capitalization of US $
54.28 billion. The international magazine 'Business Week' announced the KSE as the best
performing world stock market in 2002. Since then the KSE continuously maintains the
reputation as one of the best performing markets in the world.
Since 1991, foreign investors have an equal opportunity together with local investors to
operate in the secondary capital market on the Karachi Stock Exchange. The
establishment of the new policy for foreign investors and initiated privatization in
Pakistan has accelerated the development of the KSE, which had even 663 companies
listed in 2006. In addition, companies have a choice to be listed on one of the two
markets - the ready market and the over-the-counter (OTC) market, which has lesser
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Problems Facing Karachi Stock Exchange
listing requirements. While the ready market requires listing companies to have minimum
paid up capital of Rs 200 million (about UK 1.8 m), the companies with minimum of Rs
100 million can be listed on the OTC market.
The Karachi Stock Exchange trades the KSE-100 Index. It is a highly-diversified index of
100 largest capitalization companies' stocks from all sectors of Pakistan economy. A
constantly revised index is a good indicator of the overall Exchange performance over a
period of time. In 2005, 88% of the KSE total market capitalization was represented by
the KSE-100 Index.
The membership in the Karachi Stock Exchange is limited. Only 200 individual and
corporate entities can register as members in the KSE. In 2005, 162 members traded
actively on the Exchange. In addition, foreign corporate entities may also become the
members of the KSE with the condition that the nominee member of the company is a
citizen of Pakistan.
1.2.1 Nature of the Karachi Stock Exchange
Although initially the Karachi Stock Exchange was a physical exchange where trading
took place by an open outcry system, now the Karachi Stock Exchange is fully
automated.
Stock markets refer to a market place where investors can buy and sell stocks. The price
at which each buying and selling transaction takes is determined by the market forces (i.e.
demand and supply for a particular stock).
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Problems Facing Karachi Stock Exchange
1.3 Karachi Stock Exchange History
Karachi Stock Exchange is the biggest and most liquid exchange in Pakistan. It was
declared the “Best Performing Stock Market of the World for the year 2002”. As of
Sept25, 2009, 654 companies were listed with a market capitalization of Rs. 2.806 trillion
(US$ 33.81 billion) having listed capital of Rs. 705.873 billion (US$ 10.615 billion). The
KSE 100TM Index closed at 9359 on Sept 29, 2009.
The Karachi Stock Exchange, the oldest exchange in Pakistan, was established in 1947
and became a registered company limited a few years later. Since then it has experienced
a remarkable progress with only 5 companies listed and 90 members on the Exchange in
the 1950s and 663 listed companies and 200 members in 2006.
In 2002, the Karachi Stock Exchange was recognized internationally by the magazine
'Business Week' as one of the best performing stock markets in the world.
The Karachi Stock Exchange has started trading through the computerized trading system
KATS (Karachi Automated Trading System) since 1997. As the demand for Trading
Workstations installation has been significant during the consecutive years, today over
1000 KATS workstations are already installed. In 2005, trading in the Internet was also
initiated.
Since 1990, corporate entities can become members on the Karachi Stock Exchange.
However, they have to meet stringent requirements of the Board of Directors and own a
minimum capital of Rs. 20 million (approximately UK 181,000). At the beginning of
2006, 120 corporate members were registered in the Exchange.
The Karachi Stock Exchange introduced KSE 50 Index at the end of the 20th century.
However, because of the growth in the stock market, the Index did not represent the stock
market performance anymore. Thus, in 1991 a capital weighted KSE 100 Index launched.
At the moment, the Exchange successfully trades two world-famous indices - KSE 100
Index and KSE All Share Index, which was introduced in 1995.
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Problems Facing Karachi Stock Exchange
1.4 Purposes of the Study
The main purpose of study is to highlight the shortcomings present in following three
aspects of KSE and provide the suggestions to accelerate the development process of it.
Organizational structure of the Karachi Stock Exchange.
Trading and Trading instruments of the Karachi Stock Exchange.
Clearing and Settlement process of the Karachi Stock Exchange Secondary
purpose of this research is to provide the basic information about the importance
and functions of stock market, trading process and player which are involved in
trading process and other information with reference to financial literacy.
1.5 Context of the Study
The context of this study is that KSE can improve there performance and reached to
higher points in all over the world by improving Organizational structure of the Karachi
Stock Exchange, Trading and Trading instruments of the Karachi Stock Exchange,
Clearing and Settlement process of the Karachi Stock Exchange, trading process and
player which are involved in trading process and other information with reference to
financial literacy.
1.6 Significance of the Study
The study which I conducted is very beneficial for the business men and if we improve
the performance of the Karachi stock exchange then it will be good for our country.
1.7 Problem Discussion
Since last two decades the Karachi Stock Exchange (KSE) is progressing very well and
has made international recognition in stock trading business. This progress is the result of
reformation applied by the Security Commission of Pakistan, with help of the
Government of Pakistan. But still in comparison with developed stock exchanges of the
world, KSE is far behind in terms of infrastructure available for trading and technology
using for trade. KSE needs to improve a lot to reach at the level of developed stock
markets of the world.
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Problems Facing Karachi Stock Exchange
1.8 Research Question
How the Karachi Stock Exchange (KSE) can be reached at the level of developed stock
exchanges by improving the organizational structure, trading and trading instruments, and
clearing and settlement process?
1.9 Main Problem:
Main problem is
“Karachi stock exchange is behind as compare to the other world’s foreign
Stock Exchanges”
1.9.1 Sub Problem 1:
Inflation
1.9.2 Sub Problem 2:
Economic crises
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Problems Facing Karachi Stock Exchange
1.10 Hypothesis
H1:
Inflation is a reason for dropping the KSE that’s why KSE is still behind as compare
to stock exchange of world.
Ho:
Inflation is not a reason for dropping the KSE that’s why KSE is still behind as
compare to stock exchange of world.
H2:
Economic crises are the reason for dropping the KSE that’s why KSE is still behind
as compare to stock exchange of world.
Ho:
Economic crises are not the reason of Dropping the KSE that’s why KSE is still
behind as compare to stock exchange of world.
1.11 Assumptions
We are taking sample size of 25 people for this research which includes businessman,
students, bankers and govt. officials and I conduct research in Faisalabad.
1.12 Delimitation of the Study
While making this project I faced numerous of problems are load shedding which always
break the continuity and concentration while making project. Secondly this articles
related to my topic were not easily available on internet.
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Problems Facing Karachi Stock Exchange
1.13 Evolution of the Karachi Stock Exchange
By 2007, the number of listed companies reached 754 by the year 2007. The market
capitalization at the same time was US $52 billion whereas the listed capital was US
$8.27 billion. Following the estimates of the State bank Of Pakistan, we see that the
foreign investments in the capital market are as large as US $ 523 million.
The performance of the Karachi Stock Exchange has been wavering since the beginning
of 2007. This could be because 2007 is an election year.
1.14 Karachi Stock Exchange Indices
The Karachi Stock Exchange uses the following index:
• 50 Shares Index: This index was used initially but as the market grew there was a
need for a new index.
• KSE-100: The KSE-100 is a benchmark used to compare prices over a period of time.
For the construction of the KSE-100 companies is with the highest market
capitalization. To make the selection more representatives, the companies from all the
sectors are chosen. The index was introduced in 1991 with 1000 as base points. By
2001 it has grown to 1770 points, in 2005 to 9989 points and reached a peak of 12285
by 2007. The KSE-100 is a capital weighted index comprised of 100 companies.
• KSE-30: This index was introduced at the end of 2006. it is comprised of 30 most
floating stocks. By 1997 the KSE-30 traded at 14199 points.
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Problems Facing Karachi Stock Exchange
1.14.1 Arbitration
The disputes that arise between members and the investors in the Karachi Stock
Exchange are resolved through the advices of the Arbitration Committee of the
Exchange.
1.14.2 Settlement
The settlement in the Karachi Stock Exchange takes place through the centralized
clearing house. The shares that are traded from the Karachi Stock Exchange on Monday
and Tuesday of any week are settled the following Monday. The payments that are made
to the members or the investors are channelized through the Clearing House.
The shares of only those companies can be traded in the Karachi Stock Exchange which
has offered the shares to the public either through the prospectus or an offer for sale. The
trades in the Karachi Stock Exchange are settled through the weekly clearing.
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Problems Facing Karachi Stock Exchange
1.14.3 Karachi Stock Exchange Profile
Address
Karachi Stock Exchange (Guarantee) Limited
Stock Exchange Building, Stock Exchange Road
Karachi - 74000, Pakistan
Telephone UAN: 111-00-11-22, 2425502-3
Web Site Click here for the Karachi Stock Exchange web site
Trading Hours
Monday through Thursday: 9.30am - 3.15pm
Friday: 9.15am - 12.00pm - first session
2.15pm - 5.00pm - second session
Holidays Eid-ul-Azha, Kashmir Day (5 Feb), Ashura, Pakistan Day
(23 Mar), Labor Day (1 May), Eid Milad-un-Nabi,
Independence Day (14 Aug), Iqbal Day (9 Nov), Jummah-
Tul-Widah, Shab-e-Qadar, Eid-ul-Fitr, Christmas (25
Dec), Eid-ul-Azha - total 20 holiday days.
Securities Shares, bonds, Modaraba Certificates of listed companies,
Unit trust schemes, mutual funds certificates, futures,
indices.
Trading System Karachi Automated Trading System KATS
Key Staff Mr. Zafar Ali Khan - Chairman
Mr. M.A. Lodhi - Managing Director
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Problems Facing Karachi Stock Exchange
1.15 Business Trading
The exchange has pre-market sessions from 09:15am to 09:30am and normal trading
sessions from 09:30am to 03:30pm. It is the second oldest stock exchange in South
Asia The Karachi stock exchange has undergone a considerable deal of downturn partly
due to global financial crisis and partly on account of domestic troubles. It remained
suspended in excess of 4 months and resumed normal trading only on December 15,
2008. The KSE 100 Index and KSE 30 Index after hitting the low around mid January
has now rebounded and recovered 20-25% till March 12 2009.
1.16 Growth
The KSE is the biggest and most liquid exchange in Pakistan and in 2002 it was declared
as the “Best Performing Stock Market of the World” by Business Week. As of December
20, 2007, 671 companies were listed with the market capitalization of Rs. 4364.312
billion (US$ 73 Billion) having listed capital of Rs. 717.3 billion (US$ 12 billion). On
December 26, 2007, the KSE 100 Index reached its highest value ever and closed at
14,814.85 points.
Foreign buying interest had been very active on the KSE in 2006 and continued in 2007.
According to estimates from the State Bank of Pakistan, foreign investment in capital
markets total about US$523 Million. According to a research analyst in Pakistan, around
20pc of the total free float in KSE-30 Index is held by foreign participants.
KSE has seen some fluctuations since the start of 2008. One reason could be that it is the
election year in Pakistan, and stocks are expected to remain dull. KSE has set an all time
high of 15,000 points, before settling around the 14,000 mark.
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Problems Facing Karachi Stock Exchange
Karachi stock exchange Board of Directors has recently (2007) announced plans to
construct a 40 story high rise KSE building, as a new direction for future investment.
Disputes between investors and members of the Exchange are resolved through
deliberations of the Arbitration Committee of the Exchange.
KSE began with a 50 shares index. As the market grew a representative index was
needed. On November 1, 91 the KSE-100 was introduced and remains to this day the
most generally accepted measure of the Exchange. Karachi Stock Exchange 100 Index
(KSE-100 Index) is a benchmark used to compare prices overtime, companies with the
highest market capitalization are selected. To ensure full market representation, the
company with the highest market capitalization from each sector is also included.
In 1995 the need was felt for an all share index to reconfirm the KSE-100 and also to
provide the basis of index trading in future. On August the 29th, 1995 the KSE all share
index was constructed and introduced on September 18, 1995.
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Problems Facing Karachi Stock Exchange
1.17 SWOT Analysis
Strength:
Investing in Bonds
Holding large financial resources
Largest stock exchange of Pakistan.
Good competitive skills
Expert employees
Government support
Efficient functioning
Relations
Competitive advantages
Innovative
Weakness:
Backward technology as compare to other stock exchange of world
Some time Operating problems
High employee cost
Dependent
Losses
Sub standard working conditions
Organizations flaws effect on it.
Opportunities:
Having mostly weak competitors
Customer trust
International scope
Fast market growth
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Problems Facing Karachi Stock Exchange
Threat:
Wrong Government polices
Economic crisis
Adverse demographic conditions
Mismanagement
Effect of globalization
Free market economy
Political instability
Inflation
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Problems Facing Karachi Stock Exchange
Chapter # 2
Literature Review
Page, 15
Problems Facing Karachi Stock Exchange
2.1 Literature Review
2.1.1 Introduction:
Since last two decades the Karachi Stock Exchange (KSE) is progressing very well
and has made international recognition in stock trading business. This progress is the
result of reformation applied by the Security Commission of Pakistan, with help of the
Government of Pakistan. But still in comparison with developed stock exchanges of the
world, KSE is far behind in terms of infrastructure available for trading and technology
using for trade. KSE needs to improve a lot to reach at the level of developed stock
markets of the world.
Pakistan's KSE loses strength on oil prices cut
The market started off the proceedings way into the red zone and never stepped into the
green territory during the course of the day where at one stage it hit the intraday lowest
level at 7, 446.12.
Experts view Wednesday's bearish run on the back of a Supreme Court verdict Tuesday
that directed the government to abolish Carbon Tax on prices of petroleum products.
Following the verdict, a notification by Oil and Gas Regulatory Authority (OGRA) stated
that petroleum products have been cut in the tune of 11 Pakistani rupees per litre.
The benchmark KSE 100-Index plunged by 73.26 points to end at 7, 746.11, KSE 30-
Index shed 92.24 points to close at 8,020.40 levels, whereas KSE All Share Index lost
47.58 points to finish at 5,329.91 levels here.
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Problems Facing Karachi Stock Exchange
As far as the top price gainer is concerned, Shezan International Limited came out as the
top performer with 6.10 rupees surge in its price that closed at 128.10, followed by Bata
Pakistan Limited that gained 5.00 to end at 610.00, whereas Packages Limited increased
by 3.98 to finish at 158.19 rupees.
On the flip side, Fazal Textile Limited was the top decliner of the day as it shed 17.37 to
rest at 330.10 rupees, followed by Colgate Palmolive that declined by 9.00 to settle at
290.00, Attock Refinery Limited lost 7.02 to finish at 135.53 rupees. (Xinhua July 2009)
Explanation:
According to the writer’s view bearish run on the back of a Supreme Court verdict in one
day that directed the government to abolish Carbon Tax on prices of petroleum products.
Following the verdict, a notification by Oil and Gas Regulatory Authority (OGRA) stated
that petroleum products have been cut in the tune of 11 Pakistani rupees per liter.
Pak stocks receives fresh foreign investments
Karachi Stock Exchange (KSE) witnessed fresh buying worth $235 million by foreign
investors during the first quarterly in the current fiscal year, Geo News reported Saturday.
According to statistics issued by National Clearing and Settlement Company, scrip’s
worth $123 million were... (Oct, 2009)
Mixed trend at KSE; Index sustains 7,700 level
KARACHI: The benchmark KSE-100 Index of Karachi Stock Exchange (KSE)
witnessing fluctuation on Monday, closed 4 points down to 7,717. Today’s trade began
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Problems Facing Karachi Stock Exchange
in the green zone but later selling in banking sector eroded the earlier gains. The trade
volume was recorded... (Aug, 2009)
Bullish KSE closes at 7163 up 34 points
KARACHI: Karachi Stock Exchange (KSE) 100-index closed over
7100-point level, as the last trading session on the last day of week ended in positive
zone. Today the market began in possible territory and the same trend lasted in both the
session... (Jun, 2009)
KSE hits bearish low today
KARACHI: Karachi Stock Exchange witnessed narrowed trading activities today, as the
KSE benchmark index could not cross 7100-point level. The trading began in positive
zone and on one occasion, the index was seen touching 7085 points level; but, the
selling pressure... (Jun, 2009)
KSE-100 index down on tax worry; rupee firmer
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Problems Facing Karachi Stock Exchange
The Karachi Stock Exchange ended nearly two percent lower on Wednesday as investors
sold shares on worry about taxes being imposed on brokerage services when the
government unveils its 2009/10 budget on June 13. The Karachi Stock Exchange’s
benchmark 100-share index... (Jun, 2009)
KSE takes up future trading, financing today
KARACHI - A meeting of the Board of Directors (BOD) of Karachi Stock Exchange will
be held on Tuesday (today) to discuss a number of market issues including the topic of
future trading and margin financing. According to market sources, forward counter will
be made operational by the end of this month, while 10 products will be made available
for future trading, mostly state-run stocks present on NIT and EOBI portfolio such as
PTC, PSO, OGDC, KAPCO, NBP and SSGC.
It is also learnt that the rate of margin will be fixed to 18 per cent and the management of
the Karachi Stock Exchange has given the proposals to the BOD.
Moreover, it is also expected that matter of ready board leverage product will also be
discussed as market participants were desperately looking for a solution to this serious
problem.
Benchmark 100-index has shown range-bound activity in the past few weeks and market
have witnessed limited turnover ranging between 90 million shares to 200 million shares
depending on the market sentiments. “Investors at the market are nervous and they are
keeping themselves away from heavy investment activities”, said a stock broker adding,
we are hopeful that the management of the stock exchange and the authority will soon
find a proper solution to this limited trading motion of the market. (July, 2009)
Explanation:
In this article writer tell that a meeting of the Board of Directors (BOD) of Karachi Stock
Exchange will be held on Tuesday (today) to discuss a number of market issues including
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Problems Facing Karachi Stock Exchange
the topic of future trading and margin financing. According to market sources, forward
counter will be made operational by the end of this month, while 10 products will be
made available for future trading, mostly state-run stocks present on NIT and EOBI
portfolio such as PTC, PSO, OGDC, KAPCO, NBP and SSGC
Karachi Stock Market Future Predictions
Karachi Stock Exchange is showing good response since the beginning of this week.
Some shares became most wanted and are not letting investors to buy. You can look at
PAKRI, Bestway Cement, Netsole, JSCL etc. these are going really good and also hope
to be good in future too especially PAKRI and JSCL. PAKRI is expected to be near 70
and JSCL near 50. AHSL, Netsol, Bestway Cement, DG Khan Cement.
Keeping in view current market situations, one of my best friends has written his analysis
about future market capitalization. It’s really interesting and is beneficial. Please find the
text below:
Friends,
I am closely watching Karachi Stock Exchange and thoroughly reviewing ups and downs
of indexes since last month. It is a matter of pleasure, joy and happiness to know that our
market has revived and started to cross the psychological limits. For instance in last week
market seemed to be bullish and has crossed targets, speculations and psychological
limits. By increasing 308.24 points market index has reached up to 7471.28 points. And
investment has increased up to 84 Billion rupees. It is truly a great news and achievement
especially in this time of recession and economical crisis. Few days back we have heard
some regretful news about losing confidence of investors, local investors were
transferring their investments to foreign countries e.g. Dubai, UK etc. some big
companies have did a massive layoff, some companies were getting close and were trying
Page, 20
Problems Facing Karachi Stock Exchange
to windup their Pakistan operations, our market was continuously loosing points, etc.
Some reasons for this instability, volatility and insecurity of market were:
International Economic Crisis
Banks were getting bankrupt and were failed to collect revenue, installments on
loans and investments
Political turmoil in Pakistan
Suspension of Chief Justice
Swat Operation (recently), Lal Masjid Operation, Religious controversies,
Terrorists activities, etc.
Load shedding and Water supply problems
Inflation, increase in Petrol, Diesel, Electricity, and prices of other common goods
and implementation of some unfair taxes
Traders and other social society members are doing strikes, and they have planned
to continue in future
These are just a few common problems which I think were the major causes of a rapid
flux in market, which may have caused to shoot your blood pressure, increased your heart
beats or may have broken your hearts and ultimately some of you have totally lost your
confidence in market.
But now I think there is no more need to get depressed, because our market has
again getting revived. According to my point of view, the most common reasons
for the market revival are:
Chief justice issue has been resolved
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Problems Facing Karachi Stock Exchange
Swat operation is near to finish and after that peace is expected in our country
Foreign Investors have showed their interest in our Banking, Oil & Gas
companies and in Cement sector also
CBR has collected more than 1150 billion rupees in form of taxes
Pakistan Government has received a huge amount of money for the help of Swat
refugees from US and others
Next installment of loan is expected in near future from IMF, Asian Development
Bank etc. when this money will float, it will definitely causes some positive
impact in our economy
National Saving Schemes have decreased their interest rates, profit margins have
also decreased in Real states etc. so investors are planning to transfer the
investments in stock exchange
Some good reports of earning, profit and revenue of KSE listed companies are
expected In upcoming weeks
And because of these factors, Investors especially small investors have gain
confidence and showed their interests in different sectors e.g. Banking, Oil & Gas,
Cement, Investment & Securities etc.
By considering these factors, and according to experts, there is a lot of potential exists in
our market. And it is right time of buying. Some recommended sectors and the leading
companies are as follows:
Investment Finance & Securities
Jahangir Sidiqui Companies
Arif Habib Securities
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Problems Facing Karachi Stock Exchange
Banking Sector
National Bank of Pakistan
Muslim Commercial Bank
Oil & Gas Sector
OGDCL
Pakistan Oil Fields Pak Petroleum
Cement Sector
DG Cement
Lucky Cement
Bestway Cement
Net sol
Last Week’s Top Companies
DG Cement
PTCl (SADIQ RIZVI , July, 2009)
Explanation :
I am closely watching this article author focus Karachi Stock Exchange and thoroughly
reviewing ups and downs of indexes since last month. And tell some common problems
which he thinks were the major causes of a rapid flux in market, which may have caused
to shoot your blood pressure, increased your heart beats or may have broken your hearts
and ultimately some of you have totally lost your confidence in market.
Page, 23
Problems Facing Karachi Stock Exchange
By considering these factors, and according to experts, there is a lot of potential exists in
our market. And it is right time of buying.
Karachi Stock Exchange (KSE) Pakistan, Stocks, Shares, Securities, News, Weekly Analysis
Karachi Stock Exchange (KSE) is succeeded to retain psychological level of 10,000
points. KSE – 100 index had closed at 10,000.93 points by the decrement of 25.06 points
or 0.25 percent. While KSE – 30 index had closed at 10,313.27 points by the decrement
of 134.91 points or 1.29 percent.
Following news have played a vital role in progress of Karachi Stock Exchange (KSE):
Foreign Portfolio Investors have invested a huge volume ($25 Million) during the
week
Foreign investments were mainly on Cement (e.g. Lucky cement, DG Cement),
Fertilizer (Fauji fertilizer), etc.
Urea prices have increased up to Rs. 30 per bag
Dr. Hafeez Sheikh has been appointed as Financial Advisor of PM
POL’s discovery at Beta-I of 54bpd and 2.13
The fifth tranche ($1.2 Billion) of IMF is releasing shortly (31 March)
Local investors are very careful and cautious, and have opted profit selling, because
of following factors:
Offshore well Shark-I of Pak Petroleum, has declared dry
Terrorist activities throughout the country
Rising Circular debt in energy sector
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Problems Facing Karachi Stock Exchange
Lack of electricity, water and gas are adversely and continuously affecting
country’s economy and various industries e.g. Textile, Agriculture etc. And there
are rumors that government is planning to increase electricity tariff further
In next monetary policy a very limited cut in discount rate is expected
NML, Lucky Cement, Lotte Pakistan, Lafarge Pakistan, OGDC, NBP, Bank Al – Falah,
DGKC, PTC, TRG, SNGP, and SSGC were on top last week.
NOTE: The information posted in this blog (forum) is based on current affairs &
investors point of view. There may be discrepancy in the ground realities. (Rana
Khurram. March, 2010)
Explanation:
In this article the author tells that Karachi Stock Exchange (KSE) is succeeded to retain
psychological level of points and some news have played a vital role in progress of
Karachi Stock Exchange (KSE) like Foreign Portfolio Investors have invested a huge
volume during the week and Urea prices have increased etc
And then Local investors are very careful and cautious, and have opted profit selling
which are NML, Lucky Cement, Lotte Pakistan, Lafarge Pakistan, OGDC, NBP, Bank Al
– Falah, DGKC, PTC, TRG, SNGP, and SSGC were on top last week.
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Problems Facing Karachi Stock Exchange
2.2 Literature Review Conclusion
I am closely watching Karachi Stock Exchange and thoroughly reviewing ups and downs
of indexes. main reasons for this instability, volatility and insecurity of market were:
International Economic Crisis, Banks were getting bankrupt and were failed to collect
revenue installments on loans and investments. Political turmoil in Pakistan, Suspension
of Chief Justice, Swat Operation (recently), Lal Masjid Operation, Religious
controversies, Terrorists activities, etc, Load shedding and Water supply problems.
Inflation, increase in Petrol, Diesel, Electricity, and prices of other common goods and
implementation of some unfair taxes, Traders and other social society members are doing
strikes, and they have planned to continue in future.
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Problems Facing Karachi Stock Exchange
Chapter # 3
Research
Methodology
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Problems Facing Karachi Stock Exchange
3.1 Research Methodology
Quantitative Research approach is employed for this study. This is a comparative
study in which the Karachi Stock Exchange (KSE) is compared with two the world’s
leading stock markets, the London Stock Exchange (LSE) and the OMX Nordic
Exchange Stockholm (OMXS) and only secondary data is used for this comparison.
3.2 Research Design
I selected a topic for conducting the research on Problems facing Karachi stock
exchange. I used the methodological approach of interviews from different Businessmen,
Students and teachers, for it first I develop a questionnaire and I will apply the different
tools and techniques to find out the accurate results.
3.3 Accumulations and Sample
I took sample size of 30 people for this research about Karachi stock exchange which
includes businessman, students, bankers and I conduct research in Faisalabad.
3.4 Population sample
Population Sample size
1- Students 14
2- Job person 6
3- Businessman 10
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Problems Facing Karachi Stock Exchange
3.5 Samples and Sample Method
In this research, I took the sample size of 30 people and I have chosen almost all
categories’ people which are related to Karachi Stock Exchange directly or indirectly.
3.6 Research Instruments
I prepared 5 close ended questions and 9 questions are four intervals and there are
few three intervals questions in this research’s questionnaire.
3.7 Procedures and Data Collection
In this research project mostly all the data is primary data which I will conduct
research myself like I will personally go to the students, job person, businessman and I
gathered the information through questionnaire and secondary data is also used in
literature review.
3.8 Data analysis and Interpretation
I applied the SPSS (statistical packages social science) Software to obtain the results
of the samples that I obtained. By applying this software I obtained the accurate results.
I also use the ‘Chi-Square, frequency graphs, tables, percentage and other statically tools.
3.9 Treatment of DataThe data was organized in the form of table which was presented in the %age form
and analyzed statically. The data was analyzed by SPSS (statistical packages social
science) and Chi- square method.
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Problems Facing Karachi Stock Exchange
3.10 Percentage
The Percentage was calculated by the following formula:
Where
f = frequencyn = total number of population
3.11 Chi- SquareChi – square test was applied to examine the association between independent and
dependent variable. The formula is
3.12 Degree of Freedom
Degree of Freedom = (r-1) (c-1)
Where “r” and “c” represents rows and columns respectively.
If the calculated value of chi-square of value column is greater
Than the tabulated value of significant Colum then we accept the H1 and reject the H0.
Page, 30
Problems Facing Karachi Stock Exchange
Chapter# 4
FREQUENCY, TABLES,GRAPHS
&HYPOTHSIS TESTING
Page, 31
Problems Facing Karachi Stock Exchange
4.1 FREQUENCY TABLES AND GRAPHS
Q: 1 what is your Occupation?Occupation
Frequency Percent Valid PercentCumulative
PercentValid Student 14 46.7 46.7 46.7 Job person 6 20.0 20.0 66.7 businessman 10 33.3 33.3 100.0 Total 30 100.0 100.0
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Problems Facing Karachi Stock Exchange
Explanation
I choose the people as sample for filling the questionnaire. I took the sample 16 Students, 6 and 10 are Teacher Businessman.
Q: 2 What is your qualification?
Qualification
Frequency Percent Valid PercentCumulative
PercentValid primary/secondary
education 3 10.0 10.0 10.0
intermediate 12 40.0 40.0 50.0
graduate 5 16.7 16.7 66.7
post graduate 10 33.3 33.3 100.0
Total 30 100.0 100.0
Page, 33
BusinessJob personStudents
Occupation
Problems Facing Karachi Stock Exchange
Explanation
Most of the people’s qualification is graduate and post graduate from which I collect the data and filled questionnaire of this research.
Q: 3 Are you satisfied with KSE performance?
Satisfied
Frequency Percent Valid PercentCumulative
PercentValid yes 22 73.3 73.3 73.3
no 8 26.7 26.7 100.0
Total 30 100.0 100.0
Page, 34
Post graduateGraduateIntermediate
Primary/secondary Education
Qualification
Problems Facing Karachi Stock Exchange
Explanation
More then 70% people are satisfied with the performance but 30% people say that it is far behind as compare to the other stock exchange of the world.
Q: 4 According to you, can Karachi Stock Exchange be the biggest and most liquid exchange of world?
Liquid
Frequency Percent Valid PercentCumulative
PercentValid yes 23 76.7 76.7 76.7
no 7 23.3 23.3 100.0
Page, 35
NoYes
Satisfied
Problems Facing Karachi Stock Exchange
Total 30 100.0 100.0
Explanation
More then 70% people said that Karachi Stock Exchange is the biggest and most liquid exchange of world.
Q: 5 What is your suggestion if a person want to invest in any sector, should he concern the KSE?
Invest
Frequency Percent Valid PercentCumulative
PercentValid yes 26 86.7 86.7 86.7
no 4 13.3 13.3 100.0
Page, 36
NoYes
Liquid
Problems Facing Karachi Stock Exchange
Total 30 100.0 100.0
Explanation
Approximately 85% people agree that they should he concern the KSE before invest in any sector,
Q: 6 Are you being guided by some one regarding KSE?
Guided
Frequency Percent Valid PercentCumulative
PercentValid yes 8 26.7 26.7 26.7
no 22 73.3 73.3 100.0
Total 30 100.0 100.0
Page, 37
NoYes
Invest
Problems Facing Karachi Stock Exchange
Explanation
Most of the people are not being guided by some one regarding Karachi Stock Exchange and some of them had not enough information about KSE problems.
Q: 7 Is Organizational structure of the Karachi Stock Exchange effect its performance?
Performance
Frequency Percent Valid PercentCumulative
PercentValid yes 15 50.0 50.0 50.0
no 5 16.7 16.7 66.7
largely effected 5 16.7 16.7 83.3
Page, 38
NoYes
Guided
Problems Facing Karachi Stock Exchange
yes but not too much 5 16.7 16.7 100.0
Total 30 100.0 100.0
Explanation
Organizational structure of the Karachi Stock Exchange strongly effects on its performance and it should be better.
Q: 8 Can KSE improve their performance and reached to higher points in all over
the world by gaining information with reference to financial literacy?
Reached
Frequency Percent Valid PercentCumulative
PercentValid Yes 14 46.7 46.7 46.7
not too much 6 20.0 20.0 66.7
yes a lot of need too 10 33.3 33.3 100.0
Page, 39
Yes but not too muchLargely effectedNoYes
Performance
Problems Facing Karachi Stock Exchange
gainTotal 30 100.0 100.0
Explanation
Most of the people believes that if KSE can’t improve their performance and reached to higher points in all over the world by gaining information with reference to financial literacy.
Q: 9 Can the Wrong Government policies Effect KSE performance?
Policies
Frequency Percent Valid PercentCumulative
PercentValid yes 12 40.0 40.0 40.0
largly effect 12 40.0 40.0 80.0
yes but not too much
6 20.0 20.0 100.0
Page, 40
Yes a lot of need too gainNot too muchYes
Reached
Problems Facing Karachi Stock Exchange
Total 30 100.0 100.0
Explanation
More then 40% people believes Wrong Government policies largely Effect KSE performance and 40% believes that it is effected and 20% people believe if is not effected on its performance.
Q: 10 Can trade and trading instruments of the Karachi Stock Exchange effect on
its performance?
Trading
Frequency Percent Valid PercentCumulative
PercentValid Yes 12 40.0 40.0 40.0
No 3 10.0 10.0 50.0
largely effect 10 33.3 33.3 83.3
Page, 41
Yes but not too muchLargely effectYes
Policies
Problems Facing Karachi Stock Exchange
yes but not too much
5 16.7 16.7 100.0
Total 30 100.0 100.0
Explanation
Trade and trading instruments of the Karachi Stock Exchange also effect on its performance because more then 80% said it is largely effected.Q: 11 Can Karachi Stock Exchange (KSE) be reached at the level of developed stock
exchanges by improving the organizational structure and clearing settlement
process?
Structure
Frequency Percent Valid PercentCumulative
PercentValid yes 26 86.7 86.7 86.7
no 4 13.3 13.3 100.0
Page, 42
Yes but not too muchLargely effectNoYes
Trading
Problems Facing Karachi Stock Exchange
Total 30 100.0 100.0
Explanation
Most of people believe Karachi Stock Exchange (KSE) be reached at the level of developed stock exchanges by improving the organizational structure and clearing settlement process.
Q: 12 Can inflation rate effect the KSE performance?
Inflation
Frequency Percent Valid PercentCumulative
PercentValid yes 26 86.7 86.7 86.7
no 4 13.3 13.3 100.0
Total 30 100.0 100.0
Page, 43
NoYes
Structure
Problems Facing Karachi Stock Exchange
Explanation
Yes Inflation rate strongly effect the KSE performance and it is the sub problem of this research and hypotheses is also based on it.
Q: 13 Can KSE performance effected by politically instability in Pakistan?
Instability
Frequency Percent Valid PercentCumulative
PercentValid yes 7 23.3 23.3 23.3
largely effect 19 63.3 63.3 86.7
yes but not too much
4 13.3 13.3 100.0
Page, 44
NoYes
Inflation
Problems Facing Karachi Stock Exchange
Total 30 100.0 100.0
Explanation
KSE performance is too much affected by politically instability in Pakistan more then 65% people said according to the questionnaire.
Q: 14 Can we say that as comparison with developed stock exchanges of the world, KSE is far behind in terms of infrastructure available for trading and technology using for trade?
Technology
Frequency Percent Valid PercentCumulative
Percent
Page, 45
Yes but not too muchLargely effectYes
Instability
Problems Facing Karachi Stock Exchange
Valid yes 18 60.0 60.0 60.0
no 12 40.0 40.0 100.0
Total 30 100.0 100.0
Explanation
As comparison with developed stock exchanges of the world, yes KSE is far behind in terms of infrastructure available for trading and technology using for trade.
Q: 15 what do you think KSE need a lot effort to reach at the level of developed
stock markets of the world?
Effort
Frequency Percent Valid PercentCumulative
PercentValid yes 18 60.0 60.0 60.0
Page, 46
NoYes
Technology
Problems Facing Karachi Stock Exchange
not too much 1 3.3 3.3 63.3
yes a lot of need 11 36.7 36.7 100.0
Total 30 100.0 100.0
Explanation
Most of people think KSE need a lot effort to reach at the level of developed stock markets of the world.Q: 16 what do you think that economic crisis are the reason of Karachi stock
exchange performance?
Economic
Frequency Percent Valid PercentCumulative
PercentValid Yes 10 33.3 33.3 33.3
No 1 3.3 3.3 36.7
Page, 47
Yes a lot of needNot too muchYes
Effort
Problems Facing Karachi Stock Exchange
strongly effect 12 40.0 40.0 76.7
not too much effected
7 23.3 23.3 100.0
Total 30 100.0 100.0
Explanation
People think that economic crisis is the big reason of Karachi stock exchange
performance and it is also sub problem of this research.
Age
Frequency Percent Valid PercentCumulative
PercentValid 21.00 3 10.0 10.0 10.0
22.00 6 20.0 20.0 30.0
23.00 6 20.0 20.0 50.0
24.00 7 23.3 23.3 73.3
26.00 1 3.3 3.3 76.7
Page, 48
Not too much effectedStrongly effectNoYes
Economic
Problems Facing Karachi Stock Exchange
27.00 1 3.3 3.3 80.0
28.00 2 6.7 6.7 86.7
30.00 1 3.3 3.3 90.0
31.00 1 3.3 3.3 93.3
32.00 1 3.3 3.3 96.7
34.00 1 3.3 3.3 100.0
Total 30 100.0 100.0
Gender
Frequency Percent Valid PercentCumulative
Percent
Page, 49
34.0032.0031.0030.0028.0027.0026.0024.0023.0022.0021.00
Age
Problems Facing Karachi Stock Exchange
Valid male 24 80.0 80.0 80.0
female 6 20.0 20.0 100.0
Total 30 100.0 100.0
4.2 HYPOTHSIS TESTING
Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percentoccupation * 30 100.0% 0 .0% 30 100.0%
Page, 50
femalemale
Gender
Problems Facing Karachi Stock Exchange
inflation
Occupation * Inflation Cross Tabulation
inflation Total
yes no yesoccupation 1 Count 11 3 14
Expected Count 12.1 1.9 14.0
2 Count 5 1 6
Expected Count 5.2 .8 6.0
3 Count 10 0 10
Expected Count 8.7 1.3 10.0Total Count 26 4 30
Expected Count 26.0 4.0 30.0
Chi-Square Tests
Value dfAsymp. Sig.
(2-sided)Pearson Chi-Square 2.390(a) 2 .303
Likelihood Ratio 3.605 2 .165Linear-by-Linear Association
2.169 1 .141
N of Valid Cases30
According to this table the amount of value column is grater then significance value so I accept the hypothesis.
H1:
Inflation is a reason for dropping the KSE that’s why KSE is still behind as compare to stock exchange of world
Page, 51
Problems Facing Karachi Stock Exchange
Chapter # 5
Findings,Conclusion
&Recommendations
5.1 Findings
Page, 52
Problems Facing Karachi Stock Exchange
Following are some findings which I got from people response, the major causes of a
rapid flux in market,
Major part of respondents said that KSE is far behind in terms of infrastructure
available for trading and technology using for trade
According to this research questionnaire the International Economic Crisis is too
much effected on KSE performance.
More then 60% People said that Political instability is increased in Pakistan.
People think that Swat Operation (recently), Lal Masjid Operation, Religious
controversies, Terrorists activities also decreases the index of KSE etc.
People believed that Load shedding and Water supply problems also effect the
KSE performance directly.
Approximately 100 % people believed that Inflation, increase in Petrol, Diesel,
Electricity, and prices of other common goods and implementation of some unfair
taxes
More then 50% People believed that organizational structure of country effect the
KSE performance.
5.2 Conclusion
Page, 53
Problems Facing Karachi Stock Exchange
Currently, demutualization and incorporation should be the first priority of the KSE
authorities. Not only because this is the current trend of industry. Conversion into a
public limited company will encourage KSE to maximize its profit and for this
innovation and advancement will be applied in the present working style and that will
attract both domestic and foreign investors. As demutualization and incorporation is
taking time so KSE should start to stepping towards internationalization by developing
business relation with other regional and international exchanges and by attracting
regional and international companies for cross border listing on its indices. Remaining
three suggestions: separate markets for different capital companies, improvement in
derivative market and upgrading in trading, clearing and settlement process can be
applied with the growth of KSE but these are also necessary to achieve the world class
standard of stock market. Presently, KSE is progressing in right direction and above
mentioned suggestions will help KSE to speedup the development process. But this is
also true that supporting environment for financial industry is still missing in Pakistan.
Because of the worst internal and external political and regional conditions, KSE is
declared the world's most dangerous haven by Economist and this recognition is the
biggest obstacle in the development of KSE.
5.3 Recommendations
Page, 54
Problems Facing Karachi Stock Exchange
I have conducted the research on the root causes of the decreasing performance of
KSE why KSE is still behind as compare to the other stock exchange of the world, so
I find out some recommendation for the standards meet KSE.
Government polices should not be restrict and that policies should be adopted
which are not effected on the performance of the Karachi Stock Exchange.
Economic crises should be minimized and that work should be done through
which the economy can establish.
Interest rate should be minimized in the country for KSE best performance.
Government should be contributed and do the work for the betterment of Karachi
Stock exchange.
Political instability should be minimizing which had the bad impact on KSE
performance.
Inflation should be minimized which influences the KSE performance.
Pakistan Government should invite foreign companies for investment in their
country which should have good impact on the performance of the KSE.
Trade and trading instruments of the KSE should be good.
There is also the need to make better the organizational structure os Karachi Stock
Exchange.
Appendix
Research Questionnaires
Page, 55
Problems Facing Karachi Stock Exchange
Dear Sir/Madam,
I am the student of MBA at informatics (Ripah International University
Islamabad).
The following questionnaires are about my research project “PROBLEM FACE BY
KARACHI STOCK EXCHANGE AND ITS REASONS” Kindly provide impartial
opinion about each statement. I request you please provide me information to complete
my research. I also undertake that all the information provided by you is solely for
academic purpose only. The information obtained from you will be kept confidential I
shall be very oblige to you.
Yours truly,
Bilal Ahmad.
Questionnaire on Problems Facing KSE
Personal Information.
Name _______________________ Date: ______________
Age _______________________
Gender _______________________
Contact _______________________
Q: 1 what is your Occupation?
Student ____ Job Person ____
Business ____ Nothing ____
Q: 2 What is your qualification?
Primary / secondary education ____ Intermediate____
Graduate _____ Post Graduate____
Q: 3 Are you satisfied with KSE performance?
Yes ____ No ____
Page, 56
Problems Facing Karachi Stock Exchange
Q: 4 According to you, can Karachi Stock Exchange be the biggest and most liquid
exchange of world?
Yes ____ No ____
Q: 5 What is your suggestion if a person want to invest in any sector, should he
concern the KSE?
Yes ____ No____
Q: 6 Are you being guided by some one regarding KSE?
Yes ____ No ____
Q: 7 Is Organizational structure of the Karachi Stock Exchange effect its
performance?
Yes ____ No ____
Largely Effected ____ Yes but not to much____
Q: 8 Can KSE improve their performance and reached to higher points in all over
the world by gaining information with reference to financial literacy?
Yes ____ No ____
Not too much ____ Yes, a lot of need to gain ____
Q: 9 Can the Wrong Government policies Effect KSE performance?
Yes ____ No ____
Largely effect ____ Yes but not to much ____
Q: 10 Can trade and trading instruments of the Karachi Stock Exchange effect on
its performance?
Yes ____ No ____
Largely effect ____ Yes but not to much ____
Q: 11 Can Karachi Stock Exchange (KSE) be reached at the level of developed stock
exchanges by improving the organizational structure and clearing settlement
process?
Yes ____ No ____ don’t know____
Q: 12 Can inflation rate effect the KSE performance?
Yes ____ No ____ Don’t know____
Page, 57
Problems Facing Karachi Stock Exchange
Q: 13 Can KSE performance effected by politically instability in Pakistan?
Yes ____ No ____
Largely effect ____ Yes but not to much ____
Q: 14 Can we say that as comparison with developed stock exchanges of the world,
KSE is far behind in terms of infrastructure available for trading and technology
using for trade?
Yes ____ No____
Q: 15 what do you think KSE need a lot effort to reach at the level of developed
stock markets of the world?
Yes ____ No ____
Not too much ____ Yes, a lot of reach ____
Q: 16 what do you think that economic crisis are the reason of Karachi stock
exchange performance?
Yes ____ No ____
Largely effect ____ Yes but not to much ____
THANK YOU FOR YOUR HELP.
Contact list
Page, 58
Problems Facing Karachi Stock Exchange
Names Occupation Contact numbersAhmad Ali Businessman 03467747467Ahsan Awan Job person 03219666649 Ali Raza Job person 03006627927Aliza Student ------Amna Iqbal Student ------Aqsa Bilal Student ------ Arif Businessman 03007636034 Asad Student 03218665737 Aslam Businessman 03457730072 Athar Businessman 03237693163 Awais Student 03217820507Ayesha Malik Student 03457939493Azam butt Businessman 03008664682 Danish Awan Businessman 03218598888Faisal Ikram Job person 03006601926Fareed Attah Businessman 03006519500 Hamid Mehmood Student 03226224524 Hamza Aataf Job person 03426939277Hina Arshad Student ------ M. Bilal Student ------M.Rehman Student 03216660306Raees Ahmad Student 03216660092Umer Raiz Businessman 03338393537Usman Iqbal Student 03007651768Waqas Javaid Job person 03437433388Wasim Businessman 03018210239Yasir Latif Student 03009656716Yousaf Businessman 03216687904Zaib Job person 03236654255Zubair Sathie Student 03326537921
Reference
Page, 59
Problems Facing Karachi Stock Exchange
www.google.com
www.maama.com
www.kse.com
www.nation.com
www.economywatch.com
www.advfn.com
http://business.globaltimes.cn/world
www.karachistockexchange.org
Bibliography
Page, 60
Problems Facing Karachi Stock Exchange
Rana Khurram. March, 2010
SADIQ RIZVI July, 2009
Jahangir Sidiqui July, 2009
Dr. Hafeez Sheikh, 2007
Xinhua July 2009
Page, 61