FEDERATION OF EURO-ASIAN STOCK EXCHANGES > YEARBOOK 2002/2003 > PAGE 43
KARACHI STOCK EXCHANGE
LETTER FROM THE MANAGING DIRECTOR AND CEO
The market is now on a positive footing
and was designated the best performing
market in the world by Business Week
in its 23 September 2002 issue.
The KSE-100 index, which was at 1273.07 on
1 January 2002, rose to 2,285.87 as of 29
November 2002 - about 80%. Similarly, market
capitalization, which was US$ 5.0 billion at
Y/E 2001, increased to US$ 10.2 billion
thereby recording a net appreciation in the
prices of shares by US$ 5.2 billion. The
average daily turnover also recorded a
considerable improvement of 171.06 million
shares as compared to 97 million shares in
the previous year.
Pakistan’s economy during the year
demonstrated great resilience in the face of
numerous shocks suffered in the aftermath
of September 11th events. However, due to
Pakistan’s alignment with the West in the
international war against terrorism followed
by restoration of relations with western
governments as well as multilateral donor
agencies and multinational investors, the
macro-economic fundamentals were back on
track. This is reflected by a modest gain in the
GDP growth rate, a sharp increase in per capita
income, low inflation, reduction in the trade
balance, a sharp increase in workers’
remittances, stability in the rate of exchange
and a strong build-up in forex reserves. A lot
of funding and various forms of assistance
that had been suspended have begun to flow
in again. Moreover, some of the structural
changes brought about by the present regime
have been quite encouraging in restoring the
confidence of the investors in the equity
market. The market is now on a positive
footing and was designated the best
performing market in the world by Business
Week in its 23 September 2002 issue.
Moin M. Fudda
Managing Director and CEO
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 houses, leasing
companies, life insurance companies, Modarabas
and mutual funds have been created by private
initiative.
The regulatory agency of the securities market
and the corporate sector is the Securities &
Exchange Commission of Pakistan (SECP). The
commission was formed on 1 January 1999 by
dissolving the Corporate Law Authority that was
established in 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 envisaged the conversion of
the CLA into the SECP as an autonomous
regulatory authority. The new system provides
administrative, operational and financial
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. The
board is also empowered to take suo moto action
and is answerable to the Parliament.
FUTURE OUTLOOK
As a part of the KSE’s continued efforts to
enhance market stability, transparency and
broad-based equity investments, a number of
structural reforms are underway which include:
implementation of a new trading system capable
of handling significantly larger volumes at higher
speeds;
implementation of necessary changes in
regulations governing futures contracts;
introduction of OTC regulations to provide a
transparent mode of listing and trading in small
capital companies;
review of the existing KSE-100 Index and
introduction of a new futures index; and
introduction of margin financing with the
guidance and assistance of the Securities &
Exchange Commission of Pakistan.