KARACHI STOCK EXCHANGE

Problems Facing Karachi Stock Exchange

Chapter # 1

Introduction &

History

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1.1 Definition

The Karachi Stock Exchange or KSE is a stock exchange

located in Karachi, Sindh, Pakistan. Founded in 1947, it is Pakistan's largest and oldest

stock exchange, with many Pakistani as well as overseas listings. Its current premises are

situated on Stock Exchange Road, in the heart of Karachi's Business District. It the oldest

and largest stock exchange in Pakistan. It was established in 1947, and has historically

been known for strong performance and high liquidity. However, the 2008 economic

crisis and political instability in Pakistan caused the Karachi Stock Exchange to drop by

more than a third between April and June 2008. See also: KSE 100 Index.

1.2 Introduction of Stock Exchange

The biggest Stock exchange of Pakistan located in Karachi is the Karachi

Stock Exchange. Due to the liquidity offered by the Karachi Stock Exchange, it is known

as stated as the “Best Performing Stock Market of the World for the year 2002”.

Karachi Stock Exchange (KSE) is the biggest and most liquid exchange in Pakistan with

the average daily turnover of 525.15 million shares and market capitalization of US $

54.28 billion. The international magazine 'Business Week' announced the KSE as the best

performing world stock market in 2002. Since then the KSE continuously maintains the

reputation as one of the best performing markets in the world.

Since 1991, foreign investors have an equal opportunity together with local investors to

operate in the secondary capital market on the Karachi Stock Exchange. The

establishment of the new policy for foreign investors and initiated privatization in

Pakistan has accelerated the development of the KSE, which had even 663 companies

listed in 2006. In addition, companies have a choice to be listed on one of the two

markets - the ready market and the over-the-counter (OTC) market, which has lesser

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listing requirements. While the ready market requires listing companies to have minimum

paid up capital of Rs 200 million (about UK 1.8 m), the companies with minimum of Rs

100 million can be listed on the OTC market.

The Karachi Stock Exchange trades the KSE-100 Index. It is a highly-diversified index of

100 largest capitalization companies' stocks from all sectors of Pakistan economy. A

constantly revised index is a good indicator of the overall Exchange performance over a

period of time. In 2005, 88% of the KSE total market capitalization was represented by

the KSE-100 Index.

The membership in the Karachi Stock Exchange is limited. Only 200 individual and

corporate entities can register as members in the KSE. In 2005, 162 members traded

actively on the Exchange. In addition, foreign corporate entities may also become the

members of the KSE with the condition that the nominee member of the company is a

citizen of Pakistan.

1.2.1 Nature of the Karachi Stock Exchange

Although initially the Karachi Stock Exchange was a physical exchange where trading

took place by an open outcry system, now the Karachi Stock Exchange is fully

automated.

Stock markets refer to a market place where investors can buy and sell stocks. The price

at which each buying and selling transaction takes is determined by the market forces (i.e.

demand and supply for a particular stock).

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1.3 Karachi Stock Exchange History

Karachi Stock Exchange is the biggest and most liquid exchange in Pakistan. It was

declared the “Best Performing Stock Market of the World for the year 2002”. As of

Sept25, 2009, 654 companies were listed with a market capitalization of Rs. 2.806 trillion

(US$ 33.81 billion) having listed capital of Rs. 705.873 billion (US$ 10.615 billion). The

KSE 100TM Index closed at 9359 on Sept 29, 2009.

The Karachi Stock Exchange, the oldest exchange in Pakistan, was established in 1947

and became a registered company limited a few years later. Since then it has experienced

a remarkable progress with only 5 companies listed and 90 members on the Exchange in

the 1950s and 663 listed companies and 200 members in 2006.

In 2002, the Karachi Stock Exchange was recognized internationally by the magazine

'Business Week' as one of the best performing stock markets in the world.

The Karachi Stock Exchange has started trading through the computerized trading system

KATS (Karachi Automated Trading System) since 1997. As the demand for Trading

Workstations installation has been significant during the consecutive years, today over

1000 KATS workstations are already installed. In 2005, trading in the Internet was also

initiated.

Since 1990, corporate entities can become members on the Karachi Stock Exchange.

However, they have to meet stringent requirements of the Board of Directors and own a

minimum capital of Rs. 20 million (approximately UK 181,000). At the beginning of

2006, 120 corporate members were registered in the Exchange.

The Karachi Stock Exchange introduced KSE 50 Index at the end of the 20th century.

However, because of the growth in the stock market, the Index did not represent the stock

market performance anymore. Thus, in 1991 a capital weighted KSE 100 Index launched.

At the moment, the Exchange successfully trades two world-famous indices - KSE 100

Index and KSE All Share Index, which was introduced in 1995.

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1.4 Purposes of the Study

The main purpose of study is to highlight the shortcomings present in following three

aspects of KSE and provide the suggestions to accelerate the development process of it.

Organizational structure of the Karachi Stock Exchange.

Trading and Trading instruments of the Karachi Stock Exchange.

Clearing and Settlement process of the Karachi Stock Exchange Secondary

purpose of this research is to provide the basic information about the importance

and functions of stock market, trading process and player which are involved in

trading process and other information with reference to financial literacy.

1.5 Context of the Study

The context of this study is that KSE can improve there performance and reached to

higher points in all over the world by improving Organizational structure of the Karachi

Stock Exchange, Trading and Trading instruments of the Karachi Stock Exchange,

Clearing and Settlement process of the Karachi Stock Exchange, trading process and

player which are involved in trading process and other information with reference to

financial literacy.

1.6 Significance of the Study

The study which I conducted is very beneficial for the business men and if we improve

the performance of the Karachi stock exchange then it will be good for our country.

1.7 Problem Discussion

Since last two decades the Karachi Stock Exchange (KSE) is progressing very well and

has made international recognition in stock trading business. This progress is the result of

reformation applied by the Security Commission of Pakistan, with help of the

Government of Pakistan. But still in comparison with developed stock exchanges of the

world, KSE is far behind in terms of infrastructure available for trading and technology

using for trade. KSE needs to improve a lot to reach at the level of developed stock

markets of the world.

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1.8 Research Question

How the Karachi Stock Exchange (KSE) can be reached at the level of developed stock

exchanges by improving the organizational structure, trading and trading instruments, and

clearing and settlement process?

1.9 Main Problem:

Main problem is

“Karachi stock exchange is behind as compare to the other world’s foreign

Stock Exchanges”

1.9.1 Sub Problem 1:

Inflation

1.9.2 Sub Problem 2:

Economic crises

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1.10 Hypothesis

H1:

Inflation is a reason for dropping the KSE that’s why KSE is still behind as compare

to stock exchange of world.

Ho:

Inflation is not a reason for dropping the KSE that’s why KSE is still behind as

compare to stock exchange of world.

H2:

Economic crises are the reason for dropping the KSE that’s why KSE is still behind

as compare to stock exchange of world.

Ho:

Economic crises are not the reason of Dropping the KSE that’s why KSE is still

behind as compare to stock exchange of world.

1.11 Assumptions

We are taking sample size of 25 people for this research which includes businessman,

students, bankers and govt. officials and I conduct research in Faisalabad.

1.12 Delimitation of the Study

While making this project I faced numerous of problems are load shedding which always

break the continuity and concentration while making project. Secondly this articles

related to my topic were not easily available on internet.

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1.13 Evolution of the Karachi Stock Exchange

By 2007, the number of listed companies reached 754 by the year 2007. The market

capitalization at the same time was US $52 billion whereas the listed capital was US

$8.27 billion. Following the estimates of the State bank Of Pakistan, we see that the

foreign investments in the capital market are as large as US $ 523 million.

The performance of the Karachi Stock Exchange has been wavering since the beginning

of 2007. This could be because 2007 is an election year.

1.14 Karachi Stock Exchange Indices

The Karachi Stock Exchange uses the following index:

• 50 Shares Index: This index was used initially but as the market grew there was a

need for a new index.

• KSE-100: The KSE-100 is a benchmark used to compare prices over a period of time.

For the construction of the KSE-100 companies is with the highest market

capitalization. To make the selection more representatives, the companies from all the

sectors are chosen. The index was introduced in 1991 with 1000 as base points. By

2001 it has grown to 1770 points, in 2005 to 9989 points and reached a peak of 12285

by 2007. The KSE-100 is a capital weighted index comprised of 100 companies.

• KSE-30: This index was introduced at the end of 2006. it is comprised of 30 most

floating stocks. By 1997 the KSE-30 traded at 14199 points.

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1.14.1 Arbitration

The disputes that arise between members and the investors in the Karachi Stock

Exchange are resolved through the advices of the Arbitration Committee of the

Exchange.

1.14.2 Settlement

The settlement in the Karachi Stock Exchange takes place through the centralized

clearing house. The shares that are traded from the Karachi Stock Exchange on Monday

and Tuesday of any week are settled the following Monday. The payments that are made

to the members or the investors are channelized through the Clearing House.

The shares of only those companies can be traded in the Karachi Stock Exchange which

has offered the shares to the public either through the prospectus or an offer for sale. The

trades in the Karachi Stock Exchange are settled through the weekly clearing.

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1.14.3 Karachi Stock Exchange Profile

Address

Karachi Stock Exchange (Guarantee) Limited

Stock Exchange Building, Stock Exchange Road

Karachi - 74000, Pakistan

Telephone UAN: 111-00-11-22, 2425502-3

Web Site Click here for the Karachi Stock Exchange web site

Trading Hours

Monday through Thursday: 9.30am - 3.15pm

Friday: 9.15am - 12.00pm - first session

2.15pm - 5.00pm - second session

Holidays Eid-ul-Azha, Kashmir Day (5 Feb), Ashura, Pakistan Day

(23 Mar), Labor Day (1 May), Eid Milad-un-Nabi,

Independence Day (14 Aug), Iqbal Day (9 Nov), Jummah-

Tul-Widah, Shab-e-Qadar, Eid-ul-Fitr, Christmas (25

Dec), Eid-ul-Azha - total 20 holiday days.

Securities Shares, bonds, Modaraba Certificates of listed companies,

Unit trust schemes, mutual funds certificates, futures,

indices.

Trading System Karachi Automated Trading System KATS

Key Staff Mr. Zafar Ali Khan - Chairman

Mr. M.A. Lodhi - Managing Director

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http://www.kse.com.pk/


1.15 Business Trading

The exchange has pre-market sessions from 09:15am to 09:30am and normal trading

sessions from 09:30am to 03:30pm. It is the second oldest stock exchange in South

Asia The Karachi stock exchange has undergone a considerable deal of downturn partly

due to global financial crisis and partly on account of domestic troubles. It remained

suspended in excess of 4 months and resumed normal trading only on December 15,

2008. The KSE 100 Index and KSE 30 Index after hitting the low around mid January

has now rebounded and recovered 20-25% till March 12 2009.

1.16 Growth

The KSE is the biggest and most liquid exchange in Pakistan and in 2002 it was declared

as the “Best Performing Stock Market of the World” by Business Week. As of December

20, 2007, 671 companies were listed with the market capitalization of Rs. 4364.312

billion (US$ 73 Billion) having listed capital of Rs. 717.3 billion (US$ 12 billion). On

December 26, 2007, the KSE 100 Index reached its highest value ever and closed at

14,814.85 points.

Foreign buying interest had been very active on the KSE in 2006 and continued in 2007.

According to estimates from the State Bank of Pakistan, foreign investment in capital

markets total about US$523 Million. According to a research analyst in Pakistan, around

20pc of the total free float in KSE-30 Index is held by foreign participants.

KSE has seen some fluctuations since the start of 2008. One reason could be that it is the

election year in Pakistan, and stocks are expected to remain dull. KSE has set an all time

high of 15,000 points, before settling around the 14,000 mark.

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http://en.wikipedia.org/wiki/State_Bank_of_Pakistan

http://en.wikipedia.org/wiki/Business_Week

http://en.wikipedia.org/wiki/2002


Karachi stock exchange Board of Directors has recently (2007) announced plans to

construct a 40 story high rise KSE building, as a new direction for future investment.

Disputes between investors and members of the Exchange are resolved through

deliberations of the Arbitration Committee of the Exchange.

KSE began with a 50 shares index. As the market grew a representative index was

needed. On November 1, 91 the KSE-100 was introduced and remains to this day the

most generally accepted measure of the Exchange. Karachi Stock Exchange 100 Index

(KSE-100 Index) is a benchmark used to compare prices overtime, companies with the

highest market capitalization are selected. To ensure full market representation, the

company with the highest market capitalization from each sector is also included.

In 1995 the need was felt for an all share index to reconfirm the KSE-100 and also to

provide the basis of index trading in future. On August the 29th, 1995 the KSE all share

index was constructed and introduced on September 18, 1995.

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http://en.wikipedia.org/wiki/September_18


http://en.wikipedia.org/wiki/Board_of_Directors


1.17 SWOT Analysis

Strength:

Investing in Bonds

Holding large financial resources

Largest stock exchange of Pakistan.

Good competitive skills

Expert employees

Government support

Efficient functioning

Relations

Competitive advantages

Innovative

Weakness:

Backward technology as compare to other stock exchange of world

Some time Operating problems

High employee cost

Dependent

Losses

Sub standard working conditions

Organizations flaws effect on it.

Opportunities:

Having mostly weak competitors

Customer trust

International scope

Fast market growth

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Threat:

Wrong Government polices

Economic crisis

Adverse demographic conditions

Mismanagement

Effect of globalization

Free market economy

Political instability

Inflation

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Chapter # 2

Literature Review

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2.1 Literature Review

2.1.1 Introduction:

Since last two decades the Karachi Stock Exchange (KSE) is progressing very well

and has made international recognition in stock trading business. This progress is the

result of reformation applied by the Security Commission of Pakistan, with help of the

Government of Pakistan. But still in comparison with developed stock exchanges of the

world, KSE is far behind in terms of infrastructure available for trading and technology

using for trade. KSE needs to improve a lot to reach at the level of developed stock

markets of the world.

Pakistan's KSE loses strength on oil prices cut

The market started off the proceedings way into the red zone and never stepped into the

green territory during the course of the day where at one stage it hit the intraday lowest

level at 7, 446.12.

Experts view Wednesday's bearish run on the back of a Supreme Court verdict Tuesday

that directed the government to abolish Carbon Tax on prices of petroleum products.

Following the verdict, a notification by Oil and Gas Regulatory Authority (OGRA) stated

that petroleum products have been cut in the tune of 11 Pakistani rupees per litre.

The benchmark KSE 100-Index plunged by 73.26 points to end at 7, 746.11, KSE 30-

Index shed 92.24 points to close at 8,020.40 levels, whereas KSE All Share Index lost

47.58 points to finish at 5,329.91 levels here.

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As far as the top price gainer is concerned, Shezan International Limited came out as the

top performer with 6.10 rupees surge in its price that closed at 128.10, followed by Bata

Pakistan Limited that gained 5.00 to end at 610.00, whereas Packages Limited increased

by 3.98 to finish at 158.19 rupees.

On the flip side, Fazal Textile Limited was the top decliner of the day as it shed 17.37 to

rest at 330.10 rupees, followed by Colgate Palmolive that declined by 9.00 to settle at

290.00, Attock Refinery Limited lost 7.02 to finish at 135.53 rupees. (Xinhua July 2009)

Explanation:

According to the writer’s view bearish run on the back of a Supreme Court verdict in one

day that directed the government to abolish Carbon Tax on prices of petroleum products.

Following the verdict, a notification by Oil and Gas Regulatory Authority (OGRA) stated

that petroleum products have been cut in the tune of 11 Pakistani rupees per liter.

Pak stocks receives fresh foreign investments

Karachi Stock Exchange (KSE) witnessed fresh buying worth $235 million by foreign

investors during the first quarterly in the current fiscal year, Geo News reported Saturday.

According to statistics issued by National Clearing and Settlement Company, scrip’s

worth $123 million were... (Oct, 2009)

Mixed trend at KSE; Index sustains 7,700 level

KARACHI: The benchmark KSE-100 Index of Karachi Stock Exchange (KSE)

witnessing fluctuation on Monday, closed 4 points down to 7,717. Today’s trade began

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http://www.easenews.net/mixed-trend-at-kse-index-sustains-7700-level

http://www.easenews.net/pak-stocks-receives-fresh-foreign-investments

http://www.easenews.net/pak-stocks-receives-fresh-foreign-investments


in the green zone but later selling in banking sector eroded the earlier gains. The trade

volume was recorded... (Aug, 2009)

Bullish KSE closes at 7163 up 34 points

KARACHI: Karachi Stock Exchange (KSE) 100-index closed over

7100-point level, as the last trading session on the last day of week ended in positive

zone. Today the market began in possible territory and the same trend lasted in both the

session... (Jun, 2009)

KSE hits bearish low today

KARACHI: Karachi Stock Exchange witnessed narrowed trading activities today, as the

KSE benchmark index could not cross 7100-point level. The trading began in positive

zone and on one occasion, the index was seen touching 7085 points level; but, the

selling pressure... (Jun, 2009)

KSE-100 index down on tax worry; rupee firmer

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http://www.easenews.net/kse-100-index-down-on-tax-worry-rupee-firmer

http://www.easenews.net/kse-hits-bearish-low-today

http://www.easenews.net/bullish-kse-closes-at-7163-up-34-points

http://www.easenews.net/kse-hits-bearish-low-today

http://www.easenews.net/kse-100-index-down-on-tax-worry-rupee-firmer


The Karachi Stock Exchange ended nearly two percent lower on Wednesday as investors

sold shares on worry about taxes being imposed on brokerage services when the

government unveils its 2009/10 budget on June 13. The Karachi Stock Exchange’s

benchmark 100-share index... (Jun, 2009)

KSE takes up future trading, financing today

KARACHI - A meeting of the Board of Directors (BOD) of Karachi Stock Exchange will

be held on Tuesday (today) to discuss a number of market issues including the topic of

future trading and margin financing. According to market sources, forward counter will

be made operational by the end of this month, while 10 products will be made available

for future trading, mostly state-run stocks present on NIT and EOBI portfolio such as

PTC, PSO, OGDC, KAPCO, NBP and SSGC.

It is also learnt that the rate of margin will be fixed to 18 per cent and the management of

the Karachi Stock Exchange has given the proposals to the BOD.

Moreover, it is also expected that matter of ready board leverage product will also be

discussed as market participants were desperately looking for a solution to this serious

problem.

Benchmark 100-index has shown range-bound activity in the past few weeks and market

have witnessed limited turnover ranging between 90 million shares to 200 million shares

depending on the market sentiments. “Investors at the market are nervous and they are

keeping themselves away from heavy investment activities”, said a stock broker adding,

we are hopeful that the management of the stock exchange and the authority will soon

find a proper solution to this limited trading motion of the market. (July, 2009)

Explanation:

In this article writer tell that a meeting of the Board of Directors (BOD) of Karachi Stock

Exchange will be held on Tuesday (today) to discuss a number of market issues including

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the topic of future trading and margin financing. According to market sources, forward

counter will be made operational by the end of this month, while 10 products will be

made available for future trading, mostly state-run stocks present on NIT and EOBI

portfolio such as PTC, PSO, OGDC, KAPCO, NBP and SSGC

Karachi Stock Market Future Predictions

Karachi Stock Exchange is showing good response since the beginning of this week.

Some shares became most wanted and are not letting investors to buy. You can look at

PAKRI, Bestway Cement, Netsole, JSCL etc. these are going really good and also hope

to be good in future too especially PAKRI and JSCL. PAKRI is expected to be near 70

and JSCL near 50. AHSL, Netsol, Bestway Cement, DG Khan Cement.

Keeping in view current market situations, one of my best friends has written his analysis

about future market capitalization. It’s really interesting and is beneficial. Please find the

text below:

Friends,

I am closely watching Karachi Stock Exchange and thoroughly reviewing ups and downs

of indexes since last month. It is a matter of pleasure, joy and happiness to know that our

market has revived and started to cross the psychological limits. For instance in last week

market seemed to be bullish and has crossed targets, speculations and psychological

limits. By increasing 308.24 points market index has reached up to 7471.28 points. And

investment has increased up to 84 Billion rupees. It is truly a great news and achievement

especially in this time of recession and economical crisis. Few days back we have heard

some regretful news about losing confidence of investors, local investors were

transferring their investments to foreign countries e.g. Dubai, UK etc. some big

companies have did a massive layoff, some companies were getting close and were trying

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http://www.karachistockexchange.org/2009/07/karachi-stock-market-future-predictions.html


to windup their Pakistan operations, our market was continuously loosing points, etc.

Some reasons for this instability, volatility and insecurity of market were:

International Economic Crisis

Banks were getting bankrupt and were failed to collect revenue, installments on

loans and investments

Political turmoil in Pakistan

Suspension of Chief Justice

Swat Operation (recently), Lal Masjid Operation, Religious controversies,

Terrorists activities, etc.

Load shedding and Water supply problems

Inflation, increase in Petrol, Diesel, Electricity, and prices of other common goods

and implementation of some unfair taxes

Traders and other social society members are doing strikes, and they have planned

to continue in future

These are just a few common problems which I think were the major causes of a rapid

flux in market, which may have caused to shoot your blood pressure, increased your heart

beats or may have broken your hearts and ultimately some of you have totally lost your

confidence in market.

But now I think there is no more need to get depressed, because our market has

again getting revived. According to my point of view, the most common reasons

for the market revival are:

Chief justice issue has been resolved

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Swat operation is near to finish and after that peace is expected in our country

Foreign Investors have showed their interest in our Banking, Oil & Gas

companies and in Cement sector also

CBR has collected more than 1150 billion rupees in form of taxes

Pakistan Government has received a huge amount of money for the help of Swat

refugees from US and others

Next installment of loan is expected in near future from IMF, Asian Development

Bank etc. when this money will float, it will definitely causes some positive

impact in our economy

National Saving Schemes have decreased their interest rates, profit margins have

also decreased in Real states etc. so investors are planning to transfer the

investments in stock exchange

Some good reports of earning, profit and revenue of KSE listed companies are

expected In upcoming weeks

And because of these factors, Investors especially small investors have gain

confidence and showed their interests in different sectors e.g. Banking, Oil & Gas,

Cement, Investment & Securities etc.

By considering these factors, and according to experts, there is a lot of potential exists in

our market. And it is right time of buying. Some recommended sectors and the leading

companies are as follows:

Investment Finance & Securities

Jahangir Sidiqui Companies

Arif Habib Securities

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Banking Sector

National Bank of Pakistan

Muslim Commercial Bank

Oil & Gas Sector

OGDCL

Pakistan Oil Fields Pak Petroleum

Cement Sector

DG Cement

Lucky Cement

Bestway Cement

Net sol

Last Week’s Top Companies

DG Cement

PTCl (SADIQ RIZVI , July, 2009)

Explanation :

I am closely watching this article author focus Karachi Stock Exchange and thoroughly

reviewing ups and downs of indexes since last month. And tell some common problems

which he thinks were the major causes of a rapid flux in market, which may have caused

to shoot your blood pressure, increased your heart beats or may have broken your hearts

and ultimately some of you have totally lost your confidence in market.

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By considering these factors, and according to experts, there is a lot of potential exists in

our market. And it is right time of buying.

Karachi Stock Exchange (KSE) Pakistan, Stocks, Shares, Securities, News, Weekly Analysis

Karachi Stock Exchange (KSE) is succeeded to retain psychological level of 10,000

points. KSE – 100 index had closed at 10,000.93 points by the decrement of 25.06 points

or 0.25 percent. While KSE – 30 index had closed at 10,313.27 points by the decrement

of 134.91 points or 1.29 percent.

Following news have played a vital role in progress of Karachi Stock Exchange (KSE):

Foreign Portfolio Investors have invested a huge volume ($25 Million) during the

week

Foreign investments were mainly on Cement (e.g. Lucky cement, DG Cement),

Fertilizer (Fauji fertilizer), etc.

Urea prices have increased up to Rs. 30 per bag

Dr. Hafeez Sheikh has been appointed as Financial Advisor of PM

POL’s discovery at Beta-I of 54bpd and 2.13

The fifth tranche ($1.2 Billion) of IMF is releasing shortly (31 March)

Local investors are very careful and cautious, and have opted profit selling, because

of following factors:

Offshore well Shark-I of Pak Petroleum, has declared dry

Terrorist activities throughout the country

Rising Circular debt in energy sector

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Lack of electricity, water and gas are adversely and continuously affecting

country’s economy and various industries e.g. Textile, Agriculture etc. And there

are rumors that government is planning to increase electricity tariff further

In next monetary policy a very limited cut in discount rate is expected

NML, Lucky Cement, Lotte Pakistan, Lafarge Pakistan, OGDC, NBP, Bank Al – Falah,

DGKC, PTC, TRG, SNGP, and SSGC were on top last week.

NOTE: The information posted in this blog (forum) is based on current affairs &

investors point of view. There may be discrepancy in the ground realities. (Rana

Khurram. March, 2010)

Explanation:

In this article the author tells that Karachi Stock Exchange (KSE) is succeeded to retain

psychological level of points and some news have played a vital role in progress of

Karachi Stock Exchange (KSE) like Foreign Portfolio Investors have invested a huge

volume during the week and Urea prices have increased etc

And then Local investors are very careful and cautious, and have opted profit selling

which are NML, Lucky Cement, Lotte Pakistan, Lafarge Pakistan, OGDC, NBP, Bank Al

– Falah, DGKC, PTC, TRG, SNGP, and SSGC were on top last week.

Page, 25

http://www.karachistockexchange.org/2010/03/karachi-stock-exchange-weekly-analysis_21.html


2.2 Literature Review Conclusion

I am closely watching Karachi Stock Exchange and thoroughly reviewing ups and downs

of indexes. main reasons for this instability, volatility and insecurity of market were:

International Economic Crisis, Banks were getting bankrupt and were failed to collect

revenue installments on loans and investments. Political turmoil in Pakistan, Suspension

of Chief Justice, Swat Operation (recently), Lal Masjid Operation, Religious

controversies, Terrorists activities, etc, Load shedding and Water supply problems.

Inflation, increase in Petrol, Diesel, Electricity, and prices of other common goods and

implementation of some unfair taxes, Traders and other social society members are doing

strikes, and they have planned to continue in future.

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Chapter # 3

Research

Methodology

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3.1 Research Methodology

Quantitative Research approach is employed for this study. This is a comparative

study in which the Karachi Stock Exchange (KSE) is compared with two the world’s

leading stock markets, the London Stock Exchange (LSE) and the OMX Nordic

Exchange Stockholm (OMXS) and only secondary data is used for this comparison.

3.2 Research Design

I selected a topic for conducting the research on Problems facing Karachi stock

exchange. I used the methodological approach of interviews from different Businessmen,

Students and teachers, for it first I develop a questionnaire and I will apply the different

tools and techniques to find out the accurate results.

3.3 Accumulations and Sample

I took sample size of 30 people for this research about Karachi stock exchange which

includes businessman, students, bankers and I conduct research in Faisalabad.

3.4 Population sample

Population Sample size

1- Students 14

2- Job person 6

3- Businessman 10

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3.5 Samples and Sample Method

In this research, I took the sample size of 30 people and I have chosen almost all

categories’ people which are related to Karachi Stock Exchange directly or indirectly.

3.6 Research Instruments

I prepared 5 close ended questions and 9 questions are four intervals and there are

few three intervals questions in this research’s questionnaire.

3.7 Procedures and Data Collection

In this research project mostly all the data is primary data which I will conduct

research myself like I will personally go to the students, job person, businessman and I

gathered the information through questionnaire and secondary data is also used in

literature review.

3.8 Data analysis and Interpretation

I applied the SPSS (statistical packages social science) Software to obtain the results

of the samples that I obtained. By applying this software I obtained the accurate results.

I also use the ‘Chi-Square, frequency graphs, tables, percentage and other statically tools.

3.9 Treatment of DataThe data was organized in the form of table which was presented in the %age form

and analyzed statically. The data was analyzed by SPSS (statistical packages social

science) and Chi- square method.

Page, 29


3.10 Percentage

The Percentage was calculated by the following formula:

Where

f = frequencyn = total number of population

3.11 Chi- SquareChi – square test was applied to examine the association between independent and

dependent variable. The formula is

3.12 Degree of Freedom

Degree of Freedom = (r-1) (c-1)

Where “r” and “c” represents rows and columns respectively.

If the calculated value of chi-square of value column is greater

Than the tabulated value of significant Colum then we accept the H1 and reject the H0.

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Chapter# 4

FREQUENCY, TABLES,GRAPHS

&HYPOTHSIS TESTING

Page, 31


4.1 FREQUENCY TABLES AND GRAPHS

Q: 1 what is your Occupation?Occupation

Frequency Percent Valid PercentCumulative

PercentValid Student 14 46.7 46.7 46.7 Job person 6 20.0 20.0 66.7 businessman 10 33.3 33.3 100.0 Total 30 100.0 100.0

Page, 32


Explanation

I choose the people as sample for filling the questionnaire. I took the sample 16 Students, 6 and 10 are Teacher Businessman.

Q: 2 What is your qualification?

Qualification


PercentValid primary/secondary

education 3 10.0 10.0 10.0

intermediate 12 40.0 40.0 50.0

graduate 5 16.7 16.7 66.7

post graduate 10 33.3 33.3 100.0

Total 30 100.0 100.0

Page, 33

BusinessJob personStudents

Occupation


Explanation

Most of the people’s qualification is graduate and post graduate from which I collect the data and filled questionnaire of this research.

Q: 3 Are you satisfied with KSE performance?

Satisfied


PercentValid yes 22 73.3 73.3 73.3

no 8 26.7 26.7 100.0

Total 30 100.0 100.0

Page, 34

Post graduateGraduateIntermediate

Primary/secondary Education

Qualification


Explanation

More then 70% people are satisfied with the performance but 30% people say that it is far behind as compare to the other stock exchange of the world.

Q: 4 According to you, can Karachi Stock Exchange be the biggest and most liquid exchange of world?

Liquid



no 7 23.3 23.3 100.0

Page, 35

NoYes

Satisfied


Total 30 100.0 100.0

Explanation

More then 70% people said that Karachi Stock Exchange is the biggest and most liquid exchange of world.

Q: 5 What is your suggestion if a person want to invest in any sector, should he concern the KSE?

Invest



no 4 13.3 13.3 100.0

Page, 36

NoYes

Liquid


Total 30 100.0 100.0

Explanation

Approximately 85% people agree that they should he concern the KSE before invest in any sector,

Q: 6 Are you being guided by some one regarding KSE?

Guided



no 22 73.3 73.3 100.0

Total 30 100.0 100.0

Page, 37

NoYes

Invest


Explanation

Most of the people are not being guided by some one regarding Karachi Stock Exchange and some of them had not enough information about KSE problems.

Q: 7 Is Organizational structure of the Karachi Stock Exchange effect its performance?

Performance



no 5 16.7 16.7 66.7

largely effected 5 16.7 16.7 83.3

Page, 38

NoYes

Guided


yes but not too much 5 16.7 16.7 100.0

Total 30 100.0 100.0

Explanation

Organizational structure of the Karachi Stock Exchange strongly effects on its performance and it should be better.

Q: 8 Can KSE improve their performance and reached to higher points in all over

the world by gaining information with reference to financial literacy?

Reached


PercentValid Yes 14 46.7 46.7 46.7

not too much 6 20.0 20.0 66.7

yes a lot of need too 10 33.3 33.3 100.0

Page, 39

Yes but not too muchLargely effectedNoYes

Performance


gainTotal 30 100.0 100.0

Explanation

Most of the people believes that if KSE can’t improve their performance and reached to higher points in all over the world by gaining information with reference to financial literacy.

Q: 9 Can the Wrong Government policies Effect KSE performance?

Policies



largly effect 12 40.0 40.0 80.0

yes but not too much

6 20.0 20.0 100.0

Page, 40

Yes a lot of need too gainNot too muchYes

Reached


Total 30 100.0 100.0

Explanation

More then 40% people believes Wrong Government policies largely Effect KSE performance and 40% believes that it is effected and 20% people believe if is not effected on its performance.

Q: 10 Can trade and trading instruments of the Karachi Stock Exchange effect on

its performance?

Trading



No 3 10.0 10.0 50.0

largely effect 10 33.3 33.3 83.3

Page, 41

Yes but not too muchLargely effectYes

Policies



5 16.7 16.7 100.0

Total 30 100.0 100.0

Explanation

Trade and trading instruments of the Karachi Stock Exchange also effect on its performance because more then 80% said it is largely effected.Q: 11 Can Karachi Stock Exchange (KSE) be reached at the level of developed stock

exchanges by improving the organizational structure and clearing settlement

process?

Structure



no 4 13.3 13.3 100.0

Page, 42

Yes but not too muchLargely effectNoYes

Trading


Total 30 100.0 100.0

Explanation

Most of people believe Karachi Stock Exchange (KSE) be reached at the level of developed stock exchanges by improving the organizational structure and clearing settlement process.

Q: 12 Can inflation rate effect the KSE performance?

Inflation



no 4 13.3 13.3 100.0

Total 30 100.0 100.0

Page, 43

NoYes

Structure


Explanation

Yes Inflation rate strongly effect the KSE performance and it is the sub problem of this research and hypotheses is also based on it.

Q: 13 Can KSE performance effected by politically instability in Pakistan?

Instability



largely effect 19 63.3 63.3 86.7


4 13.3 13.3 100.0

Page, 44

NoYes

Inflation


Total 30 100.0 100.0

Explanation

KSE performance is too much affected by politically instability in Pakistan more then 65% people said according to the questionnaire.

Q: 14 Can we say that as comparison with developed stock exchanges of the world, KSE is far behind in terms of infrastructure available for trading and technology using for trade?

Technology


Percent

Page, 45

Yes but not too muchLargely effectYes

Instability


Valid yes 18 60.0 60.0 60.0

no 12 40.0 40.0 100.0

Total 30 100.0 100.0

Explanation

As comparison with developed stock exchanges of the world, yes KSE is far behind in terms of infrastructure available for trading and technology using for trade.

Q: 15 what do you think KSE need a lot effort to reach at the level of developed

stock markets of the world?

Effort



Page, 46

NoYes

Technology


not too much 1 3.3 3.3 63.3

yes a lot of need 11 36.7 36.7 100.0

Total 30 100.0 100.0

Explanation

Most of people think KSE need a lot effort to reach at the level of developed stock markets of the world.Q: 16 what do you think that economic crisis are the reason of Karachi stock

exchange performance?

Economic



No 1 3.3 3.3 36.7

Page, 47

Yes a lot of needNot too muchYes

Effort


strongly effect 12 40.0 40.0 76.7

not too much effected

7 23.3 23.3 100.0

Total 30 100.0 100.0

Explanation

People think that economic crisis is the big reason of Karachi stock exchange

performance and it is also sub problem of this research.

Age


PercentValid 21.00 3 10.0 10.0 10.0

22.00 6 20.0 20.0 30.0

23.00 6 20.0 20.0 50.0

24.00 7 23.3 23.3 73.3

26.00 1 3.3 3.3 76.7

Page, 48

Not too much effectedStrongly effectNoYes

Economic


27.00 1 3.3 3.3 80.0

28.00 2 6.7 6.7 86.7

30.00 1 3.3 3.3 90.0

31.00 1 3.3 3.3 93.3

32.00 1 3.3 3.3 96.7

34.00 1 3.3 3.3 100.0

Total 30 100.0 100.0

Gender


Percent

Page, 49

34.0032.0031.0030.0028.0027.0026.0024.0023.0022.0021.00

Age


Valid male 24 80.0 80.0 80.0

female 6 20.0 20.0 100.0

Total 30 100.0 100.0

4.2 HYPOTHSIS TESTING

Case Processing Summary

Cases

Valid Missing Total

N Percent N Percent N Percentoccupation * 30 100.0% 0 .0% 30 100.0%

Page, 50

femalemale

Gender


inflation

Occupation * Inflation Cross Tabulation

inflation Total

yes no yesoccupation 1 Count 11 3 14

Expected Count 12.1 1.9 14.0

2 Count 5 1 6

Expected Count 5.2 .8 6.0

3 Count 10 0 10

Expected Count 8.7 1.3 10.0Total Count 26 4 30

Expected Count 26.0 4.0 30.0

Chi-Square Tests

Value dfAsymp. Sig.

(2-sided)Pearson Chi-Square 2.390(a) 2 .303

Likelihood Ratio 3.605 2 .165Linear-by-Linear Association

2.169 1 .141

N of Valid Cases30

According to this table the amount of value column is grater then significance value so I accept the hypothesis.

H1:

Inflation is a reason for dropping the KSE that’s why KSE is still behind as compare to stock exchange of world

Page, 51


Chapter # 5

Findings,Conclusion

&Recommendations

5.1 Findings

Page, 52


Following are some findings which I got from people response, the major causes of a

rapid flux in market,

Major part of respondents said that KSE is far behind in terms of infrastructure

available for trading and technology using for trade

According to this research questionnaire the International Economic Crisis is too

much effected on KSE performance.

More then 60% People said that Political instability is increased in Pakistan.

People think that Swat Operation (recently), Lal Masjid Operation, Religious

controversies, Terrorists activities also decreases the index of KSE etc.

People believed that Load shedding and Water supply problems also effect the

KSE performance directly.

Approximately 100 % people believed that Inflation, increase in Petrol, Diesel,

Electricity, and prices of other common goods and implementation of some unfair

taxes

More then 50% People believed that organizational structure of country effect the

KSE performance.

5.2 Conclusion

Page, 53


Currently, demutualization and incorporation should be the first priority of the KSE

authorities. Not only because this is the current trend of industry. Conversion into a

public limited company will encourage KSE to maximize its profit and for this

innovation and advancement will be applied in the present working style and that will

attract both domestic and foreign investors. As demutualization and incorporation is

taking time so KSE should start to stepping towards internationalization by developing

business relation with other regional and international exchanges and by attracting

regional and international companies for cross border listing on its indices. Remaining

three suggestions: separate markets for different capital companies, improvement in

derivative market and upgrading in trading, clearing and settlement process can be

applied with the growth of KSE but these are also necessary to achieve the world class

standard of stock market. Presently, KSE is progressing in right direction and above

mentioned suggestions will help KSE to speedup the development process. But this is

also true that supporting environment for financial industry is still missing in Pakistan.

Because of the worst internal and external political and regional conditions, KSE is

declared the world's most dangerous haven by Economist and this recognition is the

biggest obstacle in the development of KSE.

5.3 Recommendations

Page, 54


I have conducted the research on the root causes of the decreasing performance of

KSE why KSE is still behind as compare to the other stock exchange of the world, so

I find out some recommendation for the standards meet KSE.

Government polices should not be restrict and that policies should be adopted

which are not effected on the performance of the Karachi Stock Exchange.

Economic crises should be minimized and that work should be done through

which the economy can establish.

Interest rate should be minimized in the country for KSE best performance.

Government should be contributed and do the work for the betterment of Karachi

Stock exchange.

Political instability should be minimizing which had the bad impact on KSE

performance.

Inflation should be minimized which influences the KSE performance.

Pakistan Government should invite foreign companies for investment in their

country which should have good impact on the performance of the KSE.

Trade and trading instruments of the KSE should be good.

There is also the need to make better the organizational structure os Karachi Stock

Exchange.

Appendix

Research Questionnaires

Page, 55


Dear Sir/Madam,

I am the student of MBA at informatics (Ripah International University

Islamabad).

The following questionnaires are about my research project “PROBLEM FACE BY

KARACHI STOCK EXCHANGE AND ITS REASONS” Kindly provide impartial

opinion about each statement. I request you please provide me information to complete

my research. I also undertake that all the information provided by you is solely for

academic purpose only. The information obtained from you will be kept confidential I

shall be very oblige to you.

Yours truly,

Bilal Ahmad.

Questionnaire on Problems Facing KSE

Personal Information.

Name _______________________ Date: ______________

Age _______________________

Gender _______________________

Contact _______________________

Q: 1 what is your Occupation?

Student ____ Job Person ____

Business ____ Nothing ____

Q: 2 What is your qualification?

Primary / secondary education ____ Intermediate____

Graduate _____ Post Graduate____

Q: 3 Are you satisfied with KSE performance?

Yes ____ No ____

Page, 56


Q: 4 According to you, can Karachi Stock Exchange be the biggest and most liquid

exchange of world?

Yes ____ No ____

Q: 5 What is your suggestion if a person want to invest in any sector, should he

concern the KSE?

Yes ____ No____

Q: 6 Are you being guided by some one regarding KSE?

Yes ____ No ____

Q: 7 Is Organizational structure of the Karachi Stock Exchange effect its

performance?

Yes ____ No ____

Largely Effected ____ Yes but not to much____

Q: 8 Can KSE improve their performance and reached to higher points in all over

the world by gaining information with reference to financial literacy?

Yes ____ No ____

Not too much ____ Yes, a lot of need to gain ____

Q: 9 Can the Wrong Government policies Effect KSE performance?

Yes ____ No ____

Largely effect ____ Yes but not to much ____

Q: 10 Can trade and trading instruments of the Karachi Stock Exchange effect on

its performance?

Yes ____ No ____


Q: 11 Can Karachi Stock Exchange (KSE) be reached at the level of developed stock

exchanges by improving the organizational structure and clearing settlement

process?

Yes ____ No ____ don’t know____

Q: 12 Can inflation rate effect the KSE performance?

Yes ____ No ____ Don’t know____

Page, 57


Q: 13 Can KSE performance effected by politically instability in Pakistan?

Yes ____ No ____


Q: 14 Can we say that as comparison with developed stock exchanges of the world,

KSE is far behind in terms of infrastructure available for trading and technology

using for trade?

Yes ____ No____

Q: 15 what do you think KSE need a lot effort to reach at the level of developed

stock markets of the world?

Yes ____ No ____

Not too much ____ Yes, a lot of reach ____

Q: 16 what do you think that economic crisis are the reason of Karachi stock

exchange performance?

Yes ____ No ____


THANK YOU FOR YOUR HELP.

Contact list

Page, 58


Names Occupation Contact numbersAhmad Ali Businessman 03467747467Ahsan Awan Job person 03219666649 Ali Raza Job person 03006627927Aliza Student ------Amna Iqbal Student ------Aqsa Bilal Student ------ Arif Businessman 03007636034 Asad Student 03218665737 Aslam Businessman 03457730072 Athar Businessman 03237693163 Awais Student 03217820507Ayesha Malik Student 03457939493Azam butt Businessman 03008664682 Danish Awan Businessman 03218598888Faisal Ikram Job person 03006601926Fareed Attah Businessman 03006519500 Hamid Mehmood Student 03226224524 Hamza Aataf Job person 03426939277Hina Arshad Student ------ M. Bilal Student ------M.Rehman Student 03216660306Raees Ahmad Student 03216660092Umer Raiz Businessman 03338393537Usman Iqbal Student 03007651768Waqas Javaid Job person 03437433388Wasim Businessman 03018210239Yasir Latif Student 03009656716Yousaf Businessman 03216687904Zaib Job person 03236654255Zubair Sathie Student 03326537921

Reference

Page, 59


www.google.com

www.maama.com

www.kse.com

www.nation.com

www.economywatch.com

www.advfn.com

http://business.globaltimes.cn/world

www.karachistockexchange.org

Bibliography

Page, 60

http://www.kse.com/

http://www.maama.com/

http://www.google.com/


Rana Khurram. March, 2010

SADIQ RIZVI July, 2009

Jahangir Sidiqui July, 2009

Dr. Hafeez Sheikh, 2007

Xinhua July 2009

Page, 61

http://www.karachistockexchange.org/2010/03/karachi-stock-exchange-weekly-analysis_21.html

KARACHI STOCK EXCHANGE

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