FEDERATION OF EURO-ASIAN STOCK EXCHANGES
SEMI ANNUAL REPORT OCTOBER 2006
LAHORE STOCK EXCHANGE
As of June 30, 2006 market capitalization
increased to US$ 44.72 billion as compared
to US$ 42.35 billion at the start of this year
showing a 5.6% increase.
Hamid M. Imtiazi
Managing Director and CEO
The first quarter of the year 2006 saw strong
growth in several sectors especially Banks, Oil
& Gas, Cement, Sugar and Auto & Allied.
However, this bullish momentum could not be
sustained and the market during the second
quarter was generally bearish. The market
downturn since April 17, 2006 level of 5735.32
points to 3745.94 points as on June 14, 2006
has unnerved many investors. The market finally
settled down at 4370.27 points on June 30,
2006. The market has undergone a sharp
correction, with temporary downward pressure
exerted by leveraged speculators who had to
unwind positions, coupled with spill-over effects
of the trimming in foreign institutional equity
exposure in Asian markets and increase in
interest rates by the Federal Reserve in the U.S.
and the Bank of England in the UK.
However, there was no systemic risk posed to
the market as the settlement at the exchange
took place smoothly. On the proposal of
Securities & Exchange Commission of Pakistan,
the LSE has introduced several measures to
strengthen the risk management framework
during this half year.
HISTORY AND DEVELOPMENT
The LSE was incorporated in Lahore, the
provincial capital of Punjab, Pakistan, under
the Securities and Exchange Ordinance in
1969, as a company limited by guarantee.
The LSE caters to the needs of entrepreneurs
for raising capital and provides investment
opportunities to institutional investors and the
general public. The activities of the Exchange
have increased in all areas since inception.
The LSE introduced screen-based electronic
trading in 1996 and became the first fully
automated Stock Exchange of Pakistan.
The LSE has become a key institution in the
financial sector of Pakistan and has a
membership of 152 brokerage houses. As on
December 31, 2005, there were 523 listed
companies, having a listed capital of US$
7.06 billion with a market capitalization of
approximately US$ 42,349 billion.
The LSE acts as a frontline regulator of the
market under the apex regulator, the
Securities & Exchange Commission of
Pakistan. The LSE has made large
investments in technology & automation to
keep pace with globalization of securities
trading. The Exchange is fully committed to
providing a transparent, efficient, fair and
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As of June 30, 2006 market capitalization
increased to US$ 44.72 billion as compared to
US$ 42.35 billion at the start of this year
showing a 5.6% increase. In the cash market,
the average daily turnover of shares remained
64.38 million shares with average daily value of
shares traded US$ 119.89 million during the
period under review. During the period from
January to June 2006 the LSE listed 3 Open-
end Funds, 2 Closed-end Funds and 1 Term
Finance Certificate Issue of a Commercial Bank.
The improved economic scenario, conducive
environment due to structural reforms,
consistency and continuity of economic policies
including policy of privatization, deregulation
and industrialization are attracting investors to
all sectors of the economy of Pakistan.
Privatization of state-owned companies
including State Life Insurance Corporation of
Pakistan is under consideration of the
Government apart from secondary offerings of
blue chips including Oil and Gas Development
Company, National Bank of Pakistan and
United Bank Ltd. Growth prospects for Pakistan
are promising. Sustainability of investment
investor friendly environment for the benefit of
investors and issuers. The goal is to bring the
LSE up to international
standards in operational, technical, regulatory
and quality management areas and to ensure
that not only domestic but also foreign
investors are attracted to the Exchange for the
development of the country.
FUTURE OUTLOOK
In 2006 the LSE plans to:
• Continue with its strategy of increasing its
geographical outreach through the use of
information technology in order to attract
higher trading volumes. The LSE has already
successfully opened branch offices at
Faisalabad and Silakot. Similar Offices at
Multan and Gujranwala are also being
contemplated;
• Phase-out of Carry-Over Trading and its
replacement with Margin-Trading and other
modes of financing;
• Frame a strategy for the demutualization
and integration of the stock exchanges of
Pakistan in the interest of the Exchange and
capital markets of the country;
• Enhance trading in the derivatives market
and introduce Stock and Sector Index
Futures;
trends would, among other factors, depend on
Pakistan’s success in improving the business
climate by removing investment constraints,
continuity in financial reforms coupled with
strong vigilance of credit growth, and success
in curbing inflationary pressures within
manageable levels. All economic sectors of
Pakistan are open to foreign investment, foreign
investors are allowed to hold 100% foreign
equity in all economic sectors, barring very few
exceptions, and there is equal treatment given
to local and foreign investors with flexibility to
easily remit Royalty, Technical & Franchise Fee,
Capital, Profits and Dividends etc.
The LSE’s major objectives remain to provide
investors with efficient and transparent trading,
safe and secure settlement and accurate and
timely information dissemination. In another
trend-setting example, Lahore Stock Exchange
and Islamabad Stock Exchange have joined
hands to establish a Unified Trading Platform to
bring increased liquidity in the market, improve
price discovery, growth in turnover, broadening
investor base, providing cost effective service to
the investing public and image building of both
the Exchanges.
• Replace existing exposure monitoring
system with Value at Risk Margin System in
line with global practices;
• Market BrokerNet - Broker hosted Internet
Stock Trading Solution;
• Promote and market the indigenously
developed trading software i.e. Ultra Trade
and related systems to other stock
exchanges;
• Implement Oracle Real Application Cluster
for the LSE central database for high
availability and scalability;
• Develop a central gateway system
according to international standard protocols
for straight through processing. This gateway
system would be FIX compliant which is most
widely used for interfacing financial systems.
It would help brokers to connect to the third
party systems for trading. It could also be
used to connect with other regional markets
to interconnect trading systems for order
routing across the exchanges;
• Implement a regular timetable for the
Broker System Audit, in order to build
investors’ confidence;
• Strengthen the surveillance function of the
Exchange; and
• Establish a “LSE Training Institute” to
enhance investor education activities.