FEAS Yearbook FEAS Yearbook 2002 | Page 45

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.