Project Report on Islamabad Stock ExchangeIse_2

7/21/2019 Project Report on Islamabad Stock ExchangeIse_2

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A Project Report on Islamabad Stock Exchange

By

Muhammad Idrees (5!"#

A project report submitted to the Department of Accounting & Finance, Faculty of

Management Sciences, International Islamic University Islamabad in partial fulfillment of

the reuirements for the degree of

MAS$ER %& B'SIESS A)MIS$RA$I%

(&IA*E#

)epartment o+ Account,ng - &,nance

&aculty o+ Management Sc,ences

Internat,onal Islam,c 'n,.ers,ty Islamabad

A project report on Islamabad stock exchange

!


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By

Muhammad Idrees (5!"#

MAS$ER %& B'SIESS A)MIIS$RA$I%

(&IA*E#

Subm,tted $o

*h/Ma0har 1ussa,n

)epartment o+ Account,ng -&,nance

&aculty o+ Management Sc,ences

Internat,onal Islam,c 'n,.ers,ty Islamabad

2une !3!

"


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*opyr,ght4!3! by Mr/ Man0oor Ahmad and Mr/ Muhammad Idrees/

All rights are reserved# $o part of this project report can be reproduced in any form or any

means such as photocopy or electronic media etc#%ith out prior approval of authors#


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Super.,sors *ert,+,cate

'his is certified that Mr# Muhammad Idrees ()*"+ student of M-A (!#) have completed

their project report entitled ./roject report on the Islamabad Stoc0 e1change2 under my

supervision# I have chec0ed this report and found it bonafide it %or0s of authors#

Mr# 3h Ma4har 5ussain

SU/678IS97

Assistant /rofessor

Dr# :aheer Abbass

5ead, Department of Accounting & Finance

Faculty of Management Sciences

International Islamic University Islamabad

;


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Dedication

We want to dedicate this project to our parents

Who pray for our success and to my teachers who guide us in

The whole of our education.

$AB6E %& *%$E$S

)


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*17 PAR$I*'6ARS PA8E

%s

3 I$R%)'*$I% A) E9A6'$I% %& S$%*: E;*1A8E *!

35A$?6

689@U'I9$ 9F S'93= 6>35A$?6

5IS'97 9F S'93= 6>35A$?6 I$ /A=IS'A$

*"

*"

*

*" $1E S$%*: E;*18ES %& PA:IS$A *)

'56 =A7A35I S'93= 6>35A$?6 (=S6

=S6 * I$D6>

=MI * I$D6>

=S6 !** I$D36S

'56 @A5976 S'93= 6>35A$?6 (@S6

5IS'97 9F @A5997 S'93= 6>35A$?6

*B

*B

*+

*C*C

*C

* IS6AMABA) S$%*: E;*1A8E *

S597' 98678I6< 9F IS6

I$'79DU3'I9$

'56 IS@AMA-AD S'93= 6>35A$?6 MAI$ 9-E63'I86S

MISSI9$ & 8ISI9$

79@6 9F S'93= 6>35A$?6

5I67A7357 9F IS6

DU'I6S A$D 76S/9$SI-I@I'I6S

!*

!!

!"

!

!;

!+

!C

*; RE8'6ARI$R< S$R'*$'RE %& $1E ISE "!

MI$IS'7 9F FI$A$36

S63U7I' 6>35A$?6 399MISSI9$ 9F /A=IS'A$

36$'7A@ D6/9SI'7 39M/A$

6@6M6$'S 9F 36$'7A@ D6/9SI'7 39M/A

"

"

";

")

"+

B


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59< 3D3


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'56 IS6!* I$D6> 35A7'

'9'A@ ASS6'S 'U7$9867

$6< @IS'6D DU7I$? '56 6A7S

'56 IS6 !* I$D6> ?57A/5

86%SS%R< )

S'88ESS$I%S A) RE*%MME)A$I%S B!

*%*6'SI% B)

RE&ERE*ES BB

6IS$ %& $AB6ES

S>% PAR$I*'6ARS PA8E %s

1 KSE STATESTICS AND INDCES ON 24, APRIL 2012 TABLE *+

2 CDC STATESTICS TABLE "

3 INDEX CALCULATION STAGE # 1 TABLE +

4 STAGE # 2 TABLE C

5 THE REPLACEMENT OF INDEX STEP # 1 TABLE ;!

6 STEP # 2 TABLE FOR NEW DIISOR ;"

C


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! AD"USTMENT OF DIIDEND STEP # 2 TABLE FOR NEW DIISOR ;

STEP # 3 TABLE ;;

$ FIE %EARS FINANCIAL HIGHLIGHTS OF ISE TABLE ;B

10 FIE %EARS MARKET PERFORMANCE OF ISE TABLE ;

ABBRE9A$I% 6IS$

IP%s INITIAL PUBLIC OFFERINGS

*&% CHIEF FINANCIAL OFFICER

'$S UNIFIED TRADING S%STEM

:SE KARACHI STOCK EXCHANGE

2S*"OINT STOCK COMPAN%

6SE LAHORE STOCK EXCHANGE

ISE ISLAMABAD STOCK EXCHANGE

:MI KARACHI MEE&AN INDEX

M) MANAGING DIRECTOR

*E% CHIEF EXECTIE OFFICER

$&* TERM FINANCE CRTIFICATE


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8M GENERAL MANAGER

M9 MARKET ALUE

SE*P SECURIT% EXCHANGE COMMISSION OF PAKISTAN

*)* CENTRAL DEPOSITOR% S%STEM

A>* ACCOUNT

)&Is DEELOPMENT FINANCIAL INSTITUTIONS

IAS INESTOER ACCOUNT SERICES

*)S CENTRAL DEPOSITOR% S%STEM

'I UNI'UE IDENTICATION NUMBER

**P6NATIONAL CLEARING COMPAN% OF PAKISTAN LIMITED

*SS NATIONAL CLEARING SETTLEMENT S%STEM

IP& INESTOR PROTECTION FUND

6IS$ %& )IA8RAMS A) 81RAP1S

S>% PAR$I*'6ARS PA8E %

! ROLES OF STOCK EXCHANGE !;" HIERARCH% OF ISLAMABAD STOCK EXCHANGE !+

REGULATOR% AUTHOURIT% OF ISE ""

; ELEMENTS OF CDC ")

) THE ACCOUNT HOLDERS OF CDC ")

B HOW CDC WORKS WITH STOCK EXCHANGE "+

+ ACTIITIES CHART "

C KSE 100 INDEX RECOMPOSITION DIAGRAM PIE CHART OF ISE ;+!* FUNDS GRAPH ;+

!! TOTAL ASSETS GRAPH ;C!" TOTAL LIABILITIES GRAPH ;C

! TOTAL LISTED PAID UP CAPITAL GRAPH ;

!*


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!; TOTAL NO OF LISTED SECURITIES )*!) TOTAL MARKET CAPITALI&ATION GRAPH )*!B ISE 10 INDEX GRAPH )!!+ TOTAL TURN OER OF SHARES )!

!CNEW SECURITIES LISTED DURING THE %EARS

)"! ISE 10 INDEX GRAPH )"

%R8AI?A$I% %& *1AP$ERS

'he first chapter tell about the past bac0ground and history of stoc0 e1changes# It also

describes the scope and significance of stoc0 e1changes#

'he "ndchapter is all about the introduction and history of the major stoc0 e1changes in

/a0istan# 'here are only three stoc0 e1changes in /a0istan, =arachi Stoc0 61change,

@ahore Stoc0 61change, and Islamabad stoc0 e1change# 'he roles of stoc0 e1change have

been also discussed in the chapter#

'he rdchapter gives the short overvie% of Islamabad Stoc0 61change# 'hen after this it

describe an introduction and bac0ground of the Islamabad Stoc0 61change# 'his chapter

is also gives the information about 8ision, Mission and objectives and hierarchy structure

of Islamabad Stoc0 61change#

'he ;thchapter tells us that ho% the Islamabad Stoc0 61change is operating by la%# It

describes the Security 61change 3ommission of /a0istan (S63/, 3entral Depository

!!


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3ompany (3D3, $ational 3learing 3ompany of /a0istan @imited ($33/@ and their

roles in IS6#

'he )thchapter is all about the trading procedure and to ho% the Inde1 is calculate of

Islamabad Stoc0 61change#

/revious five year performance of IS6 such as, the total value, 'otal turnover of shares,

Inde1, $e% securities listed during the years, total assets, total @iabilities etc has been

diagrammatically as %ell graphically represented in the Bthchapter#

At the end of the project %e have given some suggestions and recommendations for the

IS6 to improve and enhancing the performance#

Ackno@ledgement


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E;E*$I9E S'MMAR BR%:ER A**%'$

'he participants or -ro0ers are allo%ed to 0eep their beneficially o%ned securities

and also provide the custody services to their client# 'he -ro0ers maintain the other

three more accounts %ith 3D3,


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clearing companies can also join the central depository system in the capacity of

pledges for the purpose of ris0 management#

1% *)* %R:S I$1 S$%*: E;*1A8EG

)E$AI6E) PR%*E)'RE

'here are t%o partiesJ say party A and party -, -oth the parties have their accounts in

central depository company#

A transaction ta0es place bet%een party .A2 and party .-2 at stoc0 61change# /arty

.A2 sells his securities to party .-2# 'he /arty .A2 sent reuest to his participant to

transfer his shares to party .-2 account# /articipant enters transfer reuest and data of

into system# In 3DS, Shares are transferred electronically from party .A2 account to

party .-2 account# Intimation about transfer of securities are sent to both parties#

"


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$1E SER9I*ES PR%9I)E) B< *)*C

It started investor account services (IAS in !, through this service the retail

investors can also directly open account %ith 3D3#

In "**" the central depository company started 'rustee and 3ustodial Services ('&3

service by listing the mutual funds (open & close ended and voluntary pension

scheme

In "**C the Share 7egistrar Services (S7S has been introduce by the 3D3# through

this service the facilities of transfer, registration & verification of shares and the

records of the securities is provide on the behalf of the issuer company#

$1E *E$RA6 )EP%SI$%R< S


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'he movement of cash is also performed by central depository system# 'he transfer of

cash from one account to another account %ith or %ithout security movement is

performed by 3DS#

'he pledge call and release of security is performed by 3D3#

For the settlement of transaction the delivery versus payment of securities is

performed by central depository system#

hat are the bene+,ts o+ central depos,tory system (*)S#

'his system gives a lot of benefits some of them are the follo%ings

'he 3DS have reduced the ris0 of lost and damaging of certificates#

'here %as a lot of paper %or0 at the stoc0 e1change due to the 3DS this paper %or0

has been eliminated# $o% the transfer of securities is done electronically#

9n the transfer in 3DS there is no stamp duty#

A lot of time %as reuired in transfer of o%nership but no% through 3DS it transfers

in fe% minutes#

Save a lot of time of the employees

?ive uic0 response to o%ner

It ensures the safe custody of securities#

'here is no ris0 of duplicate or forged#

*)* S$A$ES$I*S

Per+ormance 2une DF !3 2une DF !33 March D3F !3!

o o+ shares ,n *)S (,n Bn# "H/35 HD/H! 5/="

Market *ap,tal,0at,on o+

shares ,n *)S (,n $r,ll,on#3/D 3/=5H 3/H=3

J o+ shares ,n *)S @/r/t/ total

share cap,tal (Exl/8%P#H/HJ HD/5HJ H/HJ

$otal number o+ In.estor

Accounts5!F"3D 5!FH= 53F3!

umber o+ Secur,t,es ,n !/HH D/DD! D=/H

!


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In.estor Accounts (,n Bn#

A$I%A6 *6EARI8 *%MPA< %& PA:IS$A 6IMI$E) (**P6#

'he $33/@ stand for $ational 3learing 3ompany of /a0istan @imited# $ational

3learing 3ompany of /a0istan @imited provides the clearing and settlement services

to all three stoc0 e1changes in /a0istan# -efore the incorporation of $ational 3learing

3ompany of /a0istan limited the clearing and settlement %as done by each stoc0

e1change separately# 'he $ational 3learing 3ompany of /a0istan provides its

services to all the three stoc0 e1change, =arachi stoc0 e1change =S6, @ahore stoc0

e1change @S6, and the Islamabad stoc0 e1change IS6# 'he $ational clearing

company of /a0istan %as established on third Euly "**! in order to manage and

operate $ational clearing and settlement system ($3SS# 'he company %as fully

operational in the year of "***; by handling the settlement and clearing of all the

boo0 entry securities through $3SS#

'he national clearing company of /a0istan play very important role in the capital

mar0et of /a0istan by providing their services# All those %ho are involve in the

trading of shares in any one stoc0 e1change of /a0istan, the asset manage companies,

financial institutions and mutual funds, are the clients of the $ational 3learing

3ompany of /a0istan limited#

'he $33/@ operations are governed through the follo%ing

'he "** regulations of $33/@

'he "** procedures of $33/@

'he "**) 3learing house rules

And the companies ordinance !C;

$he *SS

'he $3SS stand for $ational 3learing and Settlement System/'he $3SS provide the

clearing and settlement services to the all three stoc0 e1changes of /a0istan# 'he

$3SS is fully electronic settlement system# 'he $3SS started its live operations from

December ";, "**;# 'he main purpose of $ational 3learing and settlement system is

to replace the individual clearing of all the three stoc0 e1changes of /a0istan#

"


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$1E SER9I*ES %& **P6

'he $3SS help and provide their services to all the three stoc0 e1changes and

clearing members for the clearing and settlements of transactions# 'he services

provided by $33/@ through $3SS are the follo%ingJ

-ro0er to bro0er (-'- delivery system#

Institutional delivery system

3ross e1change netting

Margin Financing module

Fully automatic pay and collect system

'ariff collection through pay and collect

$etting of future mar0et transactions %ith regular mar0et trades

7egistration of uniue identification number (UI$

Automatic handling of corporate actions of securities held in 3DS bloc0ed account

3learing and settlement facilities through the $3SS for the trades and transactions

carried on unified trading system (U'S platform of @ahore and Islamabad stoc0

e1changes#

7is0 management of trades and transactions#


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A*$I9I$IES *1AR$

;


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)


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*1 7 5

$1E $RA)I8

PR%*E)'RE A)

I)E;*A6*'6A$I%

$1E $RA)I8 PR%*E)'RE %& ISE

'he trading in a stoc0 e1change means the buying and selling of securities# 'he

buying and selling of securities on a stoc0 e1change involved the follo%ing steps

%hich are the

B


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Step 3

Select,on o+ Broker

For the investor to trade a security in stoc0 e1change he should first select the bro0er

for the trading of security# -ecause the bro0er is the authori4ed member of stoc0

e1change# For the investor only the bro0er is the legitimate person %ho can trade on

the behalf of investor a security# 9rders are given by the investor to buy or sell the

specific security for him through call or visiting physically to the bro0erage house#

Step !

Plac,ng o+ %rder

/lacing of order in the stoc0 e1change for the trading of security is the second step

then# 'he follo%ing three parties ta0ing part in dealing of sharesJ

'he stoc0 -ro0er

'he client (investor

'he jobber

'rading procedure is facilitate by the bro0er and %ho then contact to the specific

jobber on the behalf of his client in stoc0 e1change# 5e does not told anything about

himself to the jobber %eather he is a buyer or seller of the shares# For this reason the

bro0er as0s the jobber to uote t%o pricesJ

I 'he higher price at %hich he %ill be ready to sell the shares

II 'he lo%er price at %hich he %ill be ready to buy the shares

For instance, Mr# Ali %ants to sell one hundred shares of 6ngro 3ompany# 5e informsthe bro0er dealing on the stoc0 e1change# 'he bro0er as0s the jobber to give his

uotations for the 6ngro company limited shares# 'he bro0er does not lea0 out his

position to the jobber %hether he %ants buy or sell the shares of the company# 'he

jobber gives the t%o prices, one at %hich he %ants to buy and the other at %hich he is

ready to sell# For e1ample, the uotations given by the jobber are 7s# "!#* and 7s# ""

in hundred# So 7s# "!#* is the price at %hich the bro0er %ants to buy the share and

sell it at a price of 7s# ""per share# If the bro0er is not satisfied %ith this uotations he

can contact to another jobber or contact %ith the first one to reduce the margin

+


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bet%een selling and buying price# 9n the other hand if the bro0er is satisfied %ith this

ne% uotation then he informs his client about this bid price of the share# $o% if the

client agrees %ith this ne% uotation price the bargain is ta0e place#

Step D

Preparat,on o+ *ontract ote

/reparation of contract note is the third step of trading procedure# 'he contract note is

prepared by the stoc0 bro0er# 'he contract note have three copies, one copy of contact

note is send to the client, the second is given to the jobber and the third one 0eep %ith

himself#

'he informations mentioned in the contract note are as follo%

'he name the address of the bro0er

'he name and the address of the jobber

'he commission of the bro0er charged

'he bid price and the type of the share

And the date of transaction

Step

$he Settlement

'he settlement of the transaction is the final step of the trading procedure# 'he

transaction is settled according to the follo%ing conditions,

In case of ready delivery contract the transaction is settled on the current day, the

buyer pay the money and the seller deliver the securities#

In case of for%ard delivery contract the transaction settlement is done once in %ee0 or

in a month#

9n the date of settlement the sale and purchase price differences %ill be paid %ithout

any delivery of securities# If the both parties agree to postponed the deal to the ne1t

settlement date they can do it#

C


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IS6AMABA) S$%*: E;*1A8E I)E;

'he Islamabad stoc0 e1change used totally different inde1 from the rest of the t%o

stoc0 e1changes of /a0istan# 'he =arachi stoc0 e1change used the =S6!** inde1 and

the @ahore stoc0 e1change used @S6!*! inde1# And the inde1 used by Islamabad

stoc0 e1change is IS6 !* inde1# 'he inde1 used by Islamabad stoc0 e1change is

composite inde1# 'his %as developed by a company %hich name is vital information

(pvt @imited company# 'his company is a financial and data base company#

:SEC3 Index

=S6!** inde1 is a benchmar0 by the help of %hich the performance of the stoc0

price can be compared to over a period of time# 'his sho% and teach the investors a

sense of ho% /a0istan stoc0 mar0et is performing#

=S6!** inde1 %as developed %ith the base value of !*** points in the $ovember

!!# =S6!** inde1 is consisting of !** companies# 'hese !** companies are

selected on the basis of sector representation and highest mar0et capitali4ation %hich

cover the C*K of the total mar0et capitali4ation of the rest of the companies %hich are

listed on the stoc0 e1change# In the total ) sector, ; companies are selected on the

basis of highest mar0et capitali4ation in %hich a company represents only one sector,

and in it 9pen6nd mutual fund sector are not included and the remaining BB

companies are selected on the basis of largest mar0et capitali4ation but in descending

order#

R'6ES &%R $1E SE6E*$I% %& S$%*:S

'he criteria for the selection of stoc0 inclusion in the recomposition of =S6!**

inde1 are as given belo%#

Rule 7 3

'hose stoc0s %ill be selected %hich sho%s the largest mar0et capitali4ation in each of

the ; sectors of =arachi stoc0 e1change e1cluding openend mutual funds sector#

Rule 7 !

'he remaining inde1 places (in this case of BB are chosen up by the largest mar0et

capitali4ation companies in the descending order#

Rule 7 D

'he company %ill not be considered for the recomposition of =S6!** inde1 %hich

has been banned for trading or declared $on tradable and on defaulter counter in the

preceding B months from the date of recomposition#


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A number of ; top sector companies on the basis of mar0et capitali4ation may also

ualify for inclusion#

ME$1%)%6%8< &%R $1E *A6*'6A$I% %& I)E;

'he =S6 !** inde1 represents a bas0et of the number of shares outstanding and its

prices# 'he value and %orth of the bas0et are compared continuously to some starting

point or base period# For the =S6!** inde1 $ovember !! is the base period# For

the simplicity total mar0et value of the base period has been adjusted to !*** points#

So !*** points is the value %hich has been assigned for the total mar0et value of the

base period (!!# 'o 0no% about ho% the =S6!** inde1 calculation, lets ta0e an

e1ample of three stoc0s for the base period of !!#

@et suppose a share .>2 %hich has a price of 7s !* and the total number of share

outstanding is )****, so multiply the price of share %ith the number of share

outstanding it %ill give a mar0et value of stoc0 .>2 7s *#) million for the base period#

'he same process is repeated for stoc0 .2 and .:2 %hose prices are 7s#!) and

7S#* and the number of share outstanding are !***** a !)**** respectively# So the

stoc0 .2 give !#) million and stoc0 .:2 provided ;#) million of mar0et value for the

base period respectively# 'hese three mar0et values are added up and set eual to

!*** to form base period value# All the future mar0et %ill be compared to this base

period mar0et value and inde1ed form#

I)E; *A6*'6A$I% S$A8E 7 3

(-a

s e

period valueH-ase DivisorN!*** O (B,)**,***HB,)**,***N!*** O!***

S$A8E 7 !

Inde1 value as on Day "

;*

Stocks Shares pr,ce

(Pak Rupees#

umber o+ share

outstand,ng

Market 9alue

(Pak Rupees#

; 3 5F 5F

< 35 3F 3F5F

? D 35F 5FF

$otal Market *ap,tal,0at,on K =F5F


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Stocks Share pr,ces

(In Pak Rupees#

umber o+ Share

%utstand,ng

Market 9alue

(Pak Rupees#

; 3 5F "F

< 35 3F 3FHF

? D3 35F F=5F

$otal Market *ap,tal,0at,on K "F35F

So to find the inde1 for this %e %ill use the follo%ing procedure

Index K ("F35F >=F5F# L3 K 33

Since the formula for calculating =S6!** inde1 isJ

Inde1 O Psum of shares outstanding (current priceH-ase period valueQ multiply by

!*** 97

Inde1 O PMar0et capitali4ation H-ase divisorQ N !***

$1E :SEC3 I)E; REC*%MP%SI%

'he recomposition of the inde1 %ill reuired semi annually overtime# For the re

composition of =S6!** inde1 rules falls into t%o general categories#

;!


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N

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A/ SE*$%R R'6ES

B/ MAR:E$ *API$A6I?A$I% R'6ES

*/ R'6ES &%R E ISS'ES

A/ SE*$%R R'6S

'he deletion and selection of companies on the basis of top stoc0 capitali4ation# 'he

; =S6 sectors are governed by the t%o rules recommended for selection criteria#

,# $,me Base Rule

A company can enter into inde1 by becoming the largest in its sector and maintain this

position for t%o consecutive recomposition periods#

,,# 9alue Based rule

;"


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A company can enter into inde1 by becoming the largest in its sector up to !*K

greater capitali4ation value than the present largest and maintain this position for one

recomposition period#

A# *ap,tal,0at,on rule

3apitali4ation rule given the selection and deletion of companies on the basis of

among the largest capitali4ation# 3ompanies in the stoc0 mar0et only time base rule is

applied in this rule#

,# $,me Based rule

A company can be enter into the inde1 %hen it e1ceeds mar0et capitali4ation value

from the last stoc0 in the inde1, and maintain this position for the t%o recomposition

periods# 'he lo%est capitali4ation company is automatically pushed from the inde1#

Rules +or ne@ ,ssues

A ne% listed company can also ualify for the inclusion of inde1# If its mar0et

capitali4ation is at "K of the total mar0et capitali4ation#

1o@ the ReCcompos,t,on o+ :SEC3 ,ndex take placeGIn recomposition %hen some companies go out of the inde1 at the same time some

companies are entering the inde1, so this %ill affect the inde1 because of the different

si4e of capitali4ation of the outgoing companies and the ne% entering companies# So

to maintain the inde1 same and constant should be made an adjustment in the base

divisor#

@et for the Day " =S6!** inde1 is !!**, and the inde1 mar0et capitali4ation is

+!)****# @et suppose the mar0et capitali4ation for Day rd %ould be 7s# !,"**,***#

'his is because of the addition and deletion of companies on the basis Sector rule and

Mar0et 3apitali4ation rule# 'his ne% mar0et capitali4ation %hich also 0no%n as

7evised Mar0et capitali4ation is calculated just after the end of closing trading session

on Day "#

'he ne% divisor for the inde1 for =S6!** inde1 is as follo%s#


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$e% divisor O mar0et capitali4ation (Day N !***

Inde1 (Day "

So in order to get the ne% divisor

$e% Divisor O !,"**,*** N !***

!!**

$o% %e %ill get ne% divisor (Day

$e% divisor O !,**,*

$he ,mpact o+ replacement o+ stock ,n the ,ndex/

As it is e1pected that on the Day at the opening of trading the stoc0 R


61/85

So the ne% divisor is larger than the previous divisor because of the greater mar0et

capitali4ation than that of previous mar0et capitali4ation before replacement#

S$EP % 7 !

$e% divisor application on day

Stoc0s stoc0 prices (7s $o of share outs M #8 (7s

> !;#!B )*,*** +*C,***

< )!#** !B+,*** C,)!+,***

: !#)* !)*,*** ;,+"),***

'9'A@ !,)*,***

So the inde1 on day %ill be

Inde1 O Mar0et capitali4ation N !***

$e% Divisor

O !)**** N!***

!";););)#;)

Inde1 (Day O !!"*

$1E A)2'S$ME$ %& )I9I)E)

Say a company >: announce cash dividend of !* percent on its share and the boo0s

of accounts closing date started from the ; thday #no% it %ill adjust the dividend on the

closing of the rdday#

@ets ta0e an e1ample ho% to determine the adjustment of dividend


62/85

'he rdday divisor !";););)#;)

S$EP 7 3

'o calculate the revised mar0et capitali4ation %e %ill first determine 61dividend

price of stoc0 >, from this the ne% divisor for the day rd%ill also be come out#

S'93= .>2

/A7 8AU6 9F S'93= .>2 /67 S5A76 !* /67 S5A76

MA7=6' 8A@U6 9$ 7DDA 7S !;#!B /67 S5A76

3AS5 DI8ID6$D !* /6736$'

Amount of cash (7s dividend per share O par value N dividend percentage

O !* N !*K

O !* N #!*

O !

/rice of share at 61 dividend O M0t price of share cash dividend

O !;#!B !

O !#!B

Step 7 !

'he stoc0 > share price is adjusted after the closing of rdday no% to calculate the

ne% divisor for the ;thday

Stoc0 price Hshare $9 of shares outstanding M0t value of shares

> !#!B )*,*** B)C,***

< )! !B+,*** C,)!+,***

: !#)* !)*,*** ;,+)*,***

7evised M0t capitali4ation !,**,***

;B


63/85

For this the ne% divisor %ill be

$e% divisor O (7evised mar0et capitali4ation>inde1 of rdday N !***

$e% divisor O (!,**,*** > !!"* N !***

$e% divisor O !",;!*,+!;#"

S$EP 7 D

Inde1 on the ;thday

Stoc0s price of share no of shares outstanding M0t value (7s

> !;N )*,*** +**,***

< )! !B+,*** C,)!+,***

: !#)* !)*,*** ;,+"),***

M0t capitali4ation !,;",***

Inde1 O (M0t capitali4ation > ne% divisor N !***

O (!,;",*** H !";!*+!;#" N!***

O !!

;+


64/85

*1AP$ER 7 =

$1E &I9E


65/85

FI86 6A7S FI$A$3IA@ 5I?5@I?5'S 9F IS6

Income in the stoc0 e1change araising from trading listing and similar other activities# 'he

revenue in the income statement %as gradually increased during the first t%o years and come

do%n slightly in "**C because of the economic crises in "**CH*# And after that %hen stoc0

e1change recovered itself it increases its revenue tremendously in "*!*H!!#%ith the

increasing of revenue the administrative e1penses also increases respectively# 'his result

increase in the income after ta1 because of the increase in total revenue#

In the balance sheet the total assets sho% much fluctuations on increasing trend and the

liabilities of the stoc0 e1change also increases during the five previous years# Investment

properties of the stoc0 e1change are those assets capitals %hich are held for rental purposes

;

I*%ME A)

E;PE)I$'RES

!" !H ! !3 !33

7686$U6 +#) ;#+B #; !!+#); +B+#BB

ADMI$IS'7A'I86 6>/6$S6S ;"# )C#)C +#!) !B# !BC#C

FI$A$36 39S' $I@ $I@ !B#;) +B#C" !;"#"+

I$39M6 -6F97 'A> #" )*#) !#)+ );C#+ !*"#B;

I$39M6 AF'67 'A> "+#+) C#+ +#)" "C)#)! B

BA6A*E S1EE$

/79/67' A$D 6TUI/M6$'S !,*CB#C !,)B+#! ",+;)#" "#;";#B" ",!#B

I$86S'M6$' /79/67' $I@ $I@ $I@ !,*)*#; !,*;;#**

@9$? '67M I$86S'M6$' B)#" ;C# CC#*! C)#+C C+#;

3U776$' ASS6'S *+#! "BC#"B !BC#"C ";#*+ "C)#;!

'9'A@ ASS6'S !,;B"#;; !,C!#"" ,*"B#* ,C")#!+ ,+;+#*!

FU$DS C#B ;!B#C! )#C) B*#;) !,*+)#**

$9$ 3U776$' @IA-I@I'I6S BC#!C !,C+#+ ","*#CB !,)"B#*+ +#+"

3U776$' @IA-I@I'IS !*;#BB CB#BC #) C!#+C )""#C)

'9'A@ @IA-I@I'I6S !*+"#C; !;+;#;! "B*#;) !*+#C) !;B*#)+


66/85

and not for their o%n uses and resale purposes# 'he liabilities in "**C decreases due the

economic crashed in /a0istani stoc0 mar0et# 'hen increases after that as total assets of the

Islamabad stoc0 e1change increases#

$%$A6 9A6'E PIE %& ISE

!"#".$%

#!&''.&&

.'&

*.'#"!'.

#!&*.&&

%".*.*

PROPERTY AND E+UIPMENTS INVESTMENT PROPERTY LONG TERM INVESTMENT

CURRENT ASSETS TOTAL ASSETS FUNDS

NON CURRENT LIABILITIES CURRENT LIABILITIS

'his pie represent the total value of the firm %hich includes the property and euipment,

investment property, long term investment current assets, funds and current and noncurrent

liabilities of the Islamabad stoc0 e1change# During the years "*!! the total value of the

property and euipment 7s "!#B millions# 'he investment in property is 7s!*;; millions,

the long term investment C+#;, the total assets of the IS6 is 7s+;+#*! millions and the funds

available to IS6 7s!*+) million and the noncurrent liabilities is 7s +#+" and the current

liabilities is 7s!*+) millions#

)*


67/85

&& && &&% & #

&

&&

'&&

$&&

&&

#&&&

#&&

"%.$ '#$.# "%*.*

$%&.'*

#&*

FUNDS

FUNDS

'he stoc0 e1change raises funds through bro0erage houses# 'he commission %hich is paid on

the each transactions of the securities , the annual fee of bro0erage houses, the registration of

securities and that of the investors account so funds for the stoc0 e1change is continuously

increasing during the past five years #

&& && &&% & #

&.&&

#!&&&.&&

!&&&.&&

"!&&&.&&

'!&&&.&&

#!'$.''#!%#.

"!&$."&

"!*.# "!'.

TOTAL ASSETS

'otal assets of IS6 increases gradually from year to year by the previous five years

%hich sho% a good and healthy sign for the performance of the stoc0 e1change itself

as %ell as for the sta0eholders of the Islamabad Stoc0 61change#

)!


68/85

&& && &&% & #

&

*&&

#&&&

#*&&

&&&

*&&

"&&&

#&.'

#''.'#

$"&.'*

#%&.*

#'$&.*

TOTAL LIABILITIES

TOTAL LIABILITIES

As the total assets of the stoc0 e1change increases, the total liabilities are increases for

the first three years and then decreases in the last t%o years during the previous five

years# 'he decrease in liabilities sho%s that there %ill be increase in the o%ners

euities# It means the bro0ers %ill receive more %hen decreases in the liabilities#

&I9E


69/85

the first t%o years %hile from "**C and on%ard it sho% the increasing trend in the total paid

in capital#

(&&$/&) (&&/&) (&&/&%) (&&%/#&) (&/##)

&

&&

'&&

$&&

&&

'%**#

$&.'#*.$* $.%$

TOTAL LISTED PAID UP CAPITAL(Rs.Bn)

It indicates the total capital of the stoc0 e1change %hich is funded by shareholders# 'he paid

up capital is less than that up total companys capital# 'he listed paid up capital is increasing

from year to year continuously during previous five years# It means that more and more

peoples %ant to invest in stoc0 e1change %hich is a good sign for the performance of IS6#

(&&$/&) (&&/&) (&&/&%) (&&%/#&) (&/#)

"*

'&

'*

*&

**

$&

$*

&$$

'

$$%

$'

TOTAL NO.OF LISTED SECUTITIES

'his graph sho% the numbers of listed securities during the previous five years #During

this period the numbers of listed securities %as increased and decreased# During the

year "**+the total numbers %as "BB and the in "**C it decreased to ";C due to the

mar0et crashed in "**C#In "** this again increased to "B+ and the "*!* it increased to

"B#during the year "*!! the total listed securities on IS6 %as "B;#

)


70/85

(&&$/&) (&&/&) (&&/&%) (&&%/#&) (&/##)

&

*&&

#&&&

#*&&

&&&

*&&

"&&&

"*&& "&$&.$

#&*.&

$#.$%

$#.&

TOTAL MARKET CAPITALIZATTION(RS.Bn)

'his graph of the total mar0et capitali4ation of the IS6# 'otal mar0et capitali4ation of

is eual to the sum of share outstanding multiply by it shares price# 'he total mar0et

capitali4ation of the IS6 during the "**+ %as 7s *B*#B billion %hich %as decreased

to 7s !+*)#*" during the year "**#Again in "*!* this stared increased and reached

to the 7s "B"!#*+ billion in "*!!#

(&&$/&) (&&/&) (&&/&%) (&&%/#&) (&/##)

&

*&&

#&&&

#*&&

&&&

*&&

"&&$ '%.$'

##".&"

''#.#*

."

ISE 10 INDEX

);


71/85

(&&$/&) (&&/&) (&&/&%) (&&%/#&) (&/##)&

#&&

&&

"&&

'&&

*&&

$&&

"$.*

*$%

.%

*.#

"."'

TOTAL TURN OVER OF SHARES IN MILLIONS

'he graph that the total turns over of the Islamabad stoc0 e1change %as in decline from

previous five years# From "**C the total turnover of the shares decreased from 7s )B

millions to"+"#+ millions and then 7s "")#!+ million in "*!* and it further decreased to 7s

+#; million during the year "*!!#

&

'

$

(

#&

#

#'

#$

#

)

#*

#"

*

NEW SECURITIES LISTED DURING THE EARS

NEW SECURITIES

LISTED DURING THE

YEARS

'he graph sho% the numbers of ne% securities listed during the previous five years# 'he

numbers of ne% securities during "**+ %as !" %hich %ere decreased to + in "**C due to

economic crises# In "** this number increased to !) and then decreased to !in "*!*#in

"*!! just ) ne% securities %ere listed in Islamabad stoc0 e1change#

))


72/85

(&&$/&) (&&/&) (&&/&%) (&&%/#&) (&/##)

&

*&&

#&&&

#*&&

&&&

*&&

"&&&

#$ '%.$'

##".&"

''#.#*

."

ISE 10 INDEX

ISE #& INDEX

'he inde1 of Islamabad Stoc0 61change %hich is IS6 !* inde1 sho%s much fluctuation

during the previous five years# In "**CH* it goes do%n from "+;#B; to !+!#* points

because mar0et crashed in "**C# -ut after that it recover itself again and started increasing

and reached to ";;! points during "*!*, and during the year "*!! its comes to "+""#C

points#

)B


73/85

86%SS%R share

'he smallest part of o%nership in a company is called the share# shares

)+


74/85

I/ *ommon stock J

3ommon stoc0 holders are the o%ner of the company# 'hey have the right of vote to

elect the board of directors# 3ommon stoc0holders received dividend but after the

preferred stoc0 holders#

II/ Pre+erred stock /referred stoc0 holders have no right of vote# 'hey have preference over the common

stoc0 holders in dividend payment# Dividend is pay before to preferred stoc0Hshare

holders and then to common share holders#

!/ *ap,tal ga,n

It is the appreciation in the price of the share#


75/85

D

I

V

I

D

E

N

D

S T

O

C

K

D I

V I

D

E

N

C

A

S

H

D I

V I

D

E

N

Dividend is that part of earning %hich is distributed among the share holders#

Dividend is paid to shareholders of the company# Some companies are not paying

dividend %hich do not pay dividend usually give capital gain# Divided have t%o

types#

I. Stock ),.,dend*

It is the type of dividend in %hich additional shares is given to shareholders of the

common stoc0# -y the stoc0 dividend the o%nership of the shareholders remains

unchanged# 'he par value of the share is also not reduced#

II. *ash d,.,dend*'his is the payment of dividend in cash form to shareholders on each share they have

o%n of the company#

=/ Stock spl,t


76/85

I/9 stands for initial public offerings#


77/85

'hese are just li0e bonds %hich are issued by the companies to generate the funds

from general public# 'he investor receives interest from the companies by purchasing

their 'F3s#

3H/ Exchange membersh,p

'here are four types of e1change membership#

I/ Spec,al,st

'hese members are also 0no%n as mar0et ma0er# Specialists perform t%o major roles,

first they serve as a bro0er to match buy and sell orders and handle special limit

orders %ith member bro0ers# Second major role of the specialist is to act as a dealer to

maintain a fair and orderly mar0et#

II/ *omm,ss,on broker

'hese are the members %ho buy and sell (trading on the behalf of his customer

(investor# 5e receives commission for rendering this service from both the parties thebuyer and the seller#

III/ &loor broker

'his is the independent member of stoc0 e1change and %ho acts as a bro0er on the

behalf of other members#

I9/ Reg,ster traders

'hese are the members %ho use their membership to buy and sell for their o%n

account# 'hey save commission on their trading#

B!


78/85

!

"#

!s

M$

!%

#&'!

"#!s

L

&'!"

#!s

*

'!

&s$+

#

,

#-

$+'

!"#!

$ypes o+ orders

I/ Market order

It is an order %hich is given by the investor to his commission bro0er to buy or sell a

security at the best current price#

II/ 6,m,t order

In this order an individual placing a limit order specifies the buy or sell price# For

e1ample if the price of the 6ngro company private limited is currently at 7sJ ;* and

Mr# .A2 %ants to buy it only %hen its price come do%n to 7sJ ), so Mr# .A2 %ill

B"


79/85

specifies the limit order to his bro0er, and %hen the share price drop to 7sJ ) the

bro0er %ill buy the share for Mr# .A2#

III/ Short sale


80/85

3/ 6ong pos,t,on

'his is the position in %hich investor belief that in some future time the price of the

stoc0 %ill be rise and due to that reason investor purchase the stoc0# 'he investor sell

this stoc0 %hen the price of the stoc0 goes up and earn profit#

!/ Short pos,t,on

In this position the seller does not o%n the security they only borro% the security from

bro0er and sale in the open mar0et at current price %ith the e1pectation that the

security price %ill be fall do%n in future and the security %ill be bac0 to the bro0er

from %hich it %as borro%ed#

!3/ Marg,n transact,on

Margin transaction means buying the security %ithout having the enough cash# In

margin transaction, the investors provide a portion of cash to buy the security and

borro% the rest of money from bro0er#

For e1ample if you %ant to buy !**** shares of 1y4 company and each share is at the

rate of 7s !* then the total amount need to ma0e the transaction is 7s!*****, but the

investor have only 7s B**** so the investor have the option to ma0e margin

transaction by investing 7s B**** of o%n and borro% the rest of money 7s ;****

from the bro0er#

!!/ Marg,n call


81/85

S'88ES$I%S

A)

RE*%MME)A$I%S

S'88ES$I% A) RE*%MME)A$I%S

For the betterment of Islamabad stoc0 e1change %e recommended some suggestions

%hich are the follo%ing

I*REASE $1E 'MBER %& S$%*: E;*1A8ES

B)


82/85

If %e compared the number of stoc0 e1changes %ith India, %here " stoc0 e1changes

are currently in operations %hich give an easy access to the investors of India#


83/85

'o protect the investor and 0eep is interest the stoc0 e1change established a fund

%hich is called the investor protection fund (I/F# 'his is good step but it fund given

to this is very lo% so it %ould also reuired to increase#

I*REASE $1E SA6ARIES %& $1E EMP6%


84/85

*%*6'SI%

After studying the stoc0 mar0et %e have come to the point the point that stoc0 mar0et play

very crucial and important role in the economy of a country# $o% days the economists of the

%orld %hen conducting the survey regarding the economic conditions of the country they use

the stoc0 mar0et as indicator#

'he financial statements of the current year of the Islamabad stoc0 e1change revealed that

the performance of the IS6 is going %ell and better than the previous years#teh IS6 !* inde1

sho% much fluctuations from "**C to "*!!H!"# 'he inde1 of the IS6 increase from !+! to

"+"" points# 'he total mar0et capitali4ation of the IS6 is also increased, but the numbers of

the listed companies on IS6 has slightly decree in "*!"# 'he management of the IS6 is highly

professional, efficient, cooperative, and hard %or0ing# 'he trading system of the IS6 is no%

fully electronic, due to %hich the chances of the fraud has been reduce, %hich is good sign of

improvement of the IS6 system#

7ecently a bill for the demutuali4ation of the /a0istani stoc0 e1changes has been passed from

the parliament of /a0istan# 'his system %ill be launch soon in the coming months# 'he

BC


85/85

Islamabad Stoc0 61change is fully ready for the adoption of demutuali4ation system# 'his

system %ill change the o%nership system of the stoc0 e1change #through demutuali4ation of

stoc0 e1changes the o%nership %ill be transferred from the stoc0 bro0ers to investor, %hich

%ill increased the trust of the foreign as %ell as the local investors#

RE&ERE*ES

Documents

Project Report on Islamabad Stock ExchangeIse_2