KARACHI STOCK EXCHANGE
Moin M. Fudda
Managing Director and CEO
The Karachi Stock
Exchange is currently
rated as the “Best
Performing Market of the
World” and the KSE
Index reached an all time
high in the history of the
Exchange in addition to
a historic high on a new
record turnover of over
one billion shares.
The KSE 100 Index, which was 4,027.34 on
30 September 2003, reached 4,471.60 by
31 December 2003, an 11% increase.
Similarly, market capitalization increased to
US$ 16.57 billion in the 4th quarter of 2003
from US$ 15.36 billion in the previous quarter,
thereby recording a net appreciation in the
prices of shares by US$ 1.21 billion or a 7.9%
increase. The average daily turnover has also
recorded considerable improvement at
309.2 million shares during the period as
compared to 171 million shares in the
previous year.
The economic indicators of Pakistan reflect that
the downturn has finally given way to sustained
recovery and macro-economic stability. The
objective of economic consolidation initiated by
the government has been achieved
successfully through economic reforms and
strict implementation of various policy
initiatives. It is encouraging to note that fiscal
weaknesses have been minimized through
improved resource mobilization efforts, fiscal
discipline through restrained expenditure and
increased transparency at all levels.
Economic growth during the year was 5.1%,
which is the best since 1995-96 and signals the
end of the low growth phase in which the
country had been locked. This happened at a
time when there was a global slowdown, while
Pakistan’s performance remained the best in
HISTORY AND DEVELOPMENT
The Karachi Stock Exchange (KSE) came into
existence on 18 September 1947. It was later
converted and registered as a company limited
by guarantee on 10 March 1949. Although as
many as 90 members were licensed at that
time, only half a dozen were active as brokers.
Initially, only five companies were listed with a
paid-up capital of RS 37 million.
In 1991 the secondary market was opened to
foreign investors on an equal basis with local
participants. This measure, along with a policy
of privatization, has resulted in rapid growth of
the market since 1991. Privatization has been
adopted as a philosophy, and activities that
were previously reserved for the public sector
have now been opened to the private sector.
The change is most marked in the financial
sector where a number of commercial banks,
investment banks, discount institutions, leasing
companies, life insurance companies,
Modarabas and mutual funds have been
created by private initiative.
South Asia. On the back of this, there has been
a handsome increase of 17% in dollar terms in
the per capita income. Inflation has been
contained to 3.3%, which reflects continued
price stability. Investment has improved and
been recorded at 15.5% of the GDP, and
foreign exchange reserves of the country have
reached an unprecedented mark of over
US$ 11 billion, alongside continued stability in
the exchange rate. Tax revenues have shown
healthy growth along with a considerable
reduction in our debt burden. However, there is
a need to initiate a strategy to enhance
industrial activity, thereby creating employment
opportunities in to sustain reduction in poverty
prevalent in our society.
Along with improved economic growth and
stability, the market is also scaling new heights
daily. The Karachi Stock Exchange (KSE) is
currently rated as the “Best Performing Market
of the World”, and a number of new records
were attained during the year in the context of
improved operations. The KSE 100 Index
reached an all time high of 4,604.02 as of 12
September 2003 in the history of the Exchange
in addition to a historic high on a new record
turnover of over one billion shares (both ready
and futures counters) on a single day on 8
August 2003.
FUTURE OUTLOOK
1981. The SECP administers the compliance of
the Companies Ordinance, 1984, the Securities
and Exchange Ordinance, 1969, the laws
governing Modarabas, leasing companies,
NBFIs and other corporate laws, and is run by
five commissioners under the chairman. The
Asian Development Bank’s Capital Market
Restructuring Plan envisages the conversion of
the CLA into the SECP as an autonomous
regulatory authority. The new system provides
autonomy to the SECP, and at the same time
an accountability mechanism through the
establishment of the Securities and Exchange
Policy Board. All policy decisions are made by
the Board on recommendation of the SECP,
which is also empowered to take suo moto
action and is answerable to the Parliament.
The regulatory agency is the Securities &
Exchange Commission of Pakistan (SECP),
formed on 1 January 1999 by dissolving the
Corporate Law Authority that was established in
FEDERATION OF EURO-ASIAN STOCK EXCHANGES YEARBOOK 2003/2004
PAGE 52
As part of the KSE’s continued efforts for
market stability, transparency of operations
and broad-based equity investments, a
number of structural reforms are underway
which include:
• introduction of internet-based trading to
increase the depth of the market;
• replacement of COT (Carry Over
Transactions) with margin financing;
• introduction of an OTC market to provide a
transparent mode of listing and trading for
small capital companies;
• introduction of new trade instruments
(options, index and derivatives);
• promotion of TFC (Term Finance Certificate)
trading;
• attraction of new listings;
• cross border listing; and
• investor awareness programs both locally
and internationally.