To discuss the Pakistan Stock Market we may refer to the data of
Karachi Stock Exchange being the premier stock market of the
country. Most of the companies listed on Lahore and Islamabad
Stock Exchanges are also listed on Karachi Stock Exchange. The
turnover of Karachi Stock Exchange is fairly contributed by
these two fast growing regional Stock Exchanges whose members
send the unexecuted orders at their exchange to the Karachi
Stock Exchange Floor. This is an international phenomenon e.g.
India has 22 Stock Exchanges but the Bombay Stock Exchange is
regarded as the Indian Stock Exchange. Similar is the case of
the New York Stock Exchange for USA and the Tokyo Stock Exchange
for Japan.
The Karachi Stock Exchange came into existence in 1949.
Initially only 5 companies were listed with a paid up capital of
Rs 37 million. From this modest beginning the Karachi Stock
Exchange today has become the key institution in the financial
sector of Pakistan with 740 companies listed having a paid up
capital of Rs 116.372 billion and market capitalization of Rs
339.480 billion which is equivalent to USD$ 11 billion. During
its life of 45 years we have seen two wars, break up of one part
of the country which is now Bangladesh, nationalization of banks
and key industries, martial laws, Afghan war and precarious law
and order conditions in Sindh particularly in Karachi. By the
grace of God the market economic policies of the recent years.
The free market economic policies of the recent government like
d3eregulation, privatization and liberalization of foreign
exchange controls have triggered the growth of Pakistan stock
markets in the last four years. During this period we have also
seen the qualitative improvements in the financial services
available in our country. The following charts show the
historical performance of the Pakistan Stock Market.
PERFORMANCE OF PAKISTAN STOCK MARKET PRE-1990
PERFORMANCE OF PAKISTAN STOCK MARKET POST � 1990
The stock exchange gained momentum during the 1960s when the
number of listed companies went up from 81 to 291. this was due
to encouragement given to industrialization by the then
government in the form of tax holidays, subsides and export
bonus incentives. This policy was aimed at converting an
absolutely agrarian economy into a consolidated agro-industrial
economy.
However, during early 70s, there was political turmoil in the
country resulting in the dismemberment of the former East
Pakistan into Bangladesh. Along with these government began a
campaign of nationalization of companies and banks. This stunted
the growth of the economy and the market. During 1980s,
particularly in the second half we saw some policy changes like
total exemption of dividend income in the hands of the
individual shareholders, issue of Foreign Exchange Bearer
Certificates to encourage remittances through regular banking
channels and program to gradually permit the entry of the
private sector in the financial system through Investment Banks,
leasing companies etc. these measures restored the confidence of
both entrepreneurs and the investing public to a great extent.
The year 1991 saw major changes in government policies. These
included not only the continuation of the above policies but the
opening of the market to foreign investors, privatization of
public sector companies, deregularization of economy allowing
commercial banks in the private sector and liberalization of
foreign exchange controls. These policy measures are mainly
responsible for the accelerated economic activities specially in
the capital market. It is very heartening that the successive
governments during the last four years not only continued these
policies but pursued them very vigorously. These policies have
now placed Pakistan in the category of new emerging markets of
the worl with an outstanding foreign investment of US $ 1,5
billion in the companies listed on the Pakistan stock markets
based on current market Euro Convertible Bonds and GDR markets.
Dewan Saman Fibres Ltd. raised US $ 45 million in Euro
Convertible Bonds market through issue of 7 year bonds with a
coupon rate of 5% and conversion option at Rs. 195 per share.
Similarly the international offering of PTC attracted an
investment of US $ 890 milliom and substantial portion of
subscription has been opted in GDRs by the international
investors. This has been the largest issue of Pakistan and the
second largest issue from the emerging markets after Mexican
Telecom. Hubco and Chakwal Cement have also raised US $ 157
million and US $ 100 million respectively from the international
market through the instrument of GDRs.
TABLE 6.1
Additionally a number of 100% equity financed companies like
Lucky Cement, Dhan Fibres and Ibrahim Fibres raised altogether
over US $ 130 million through pre IPO placement of their shares
to international investors.
In tables (6.1 to 6.3), comparison is provided of the Karachi
Stock market with other emerging markets particularly of the
South Asian region which include India, Sri Lnka, Indonesia,
Malaysia, and Thailand in respect of turnover, growth and
return, figure 1 show the relative size of these emerging
markets.
TABLE 6.2
TABLE 6.3
In the end, let us look at the present market conditions, the
year 1994 has seen a 50% growth in its listed capital which has
increased to Rs 104.137 billion from Rs. 69.476 billion in 1993.
This large supply of securities has been one of the primary
reasons behind the increased pressure on the prices of the
listed shares. Political turmoil, social disorder, soaring
inflation and rising global interest rates pushed Pakistani
Equities sharply lower. Foreign investors avoided the market due
to increasing tension between the Government and opposition,
social disorder in Karachi and rising US interest rates. The
Government�s ability to control the internal problems will
determine the future direction of the market.
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