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KSE Corporate Presentation - 11th June, 2012


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KSE Corporate Presentation - 11th June, 2012

  1. 1. Karachi Stock Exchange Yesterday Incorporated on March 10, 1949 Premier Stock exchange of the country Started with 5 companies that had a paid up capital of Rs. 35.71 million Trading was done through an open-out-cry system The first index was the KSE 50 Index 1
  2. 2. Karachi Stock Exchange Today Exchange owned by 200 members 590 companies listed 4 indices $36.96 billion market capitalization Modern Risk Management System Var Based Margin Calculation Pre Trade Margin Verification Client Level Margining System KSE is FIX CompliantElectronic Trading through KATS 2
  3. 3. Technology Built with Leaders• With continual investment, the • Key Technology Partners KSE has one of Pakistan’s most include: advanced technology platforms• Real-time Data Recovery System in place (Business Continuity Protocols at KSE Server and KSE Network level in development)• 1+1 Redundancy• Sophisticated IT architecture to facilitate speedy execution of trades• Inhouse development of all trading platforms and systems 3
  4. 4. Karachi Stock Exchange Tomorrow Broad based investor participation Publicly Listed Company with strategic investor Cross border listings of companies Opening up of branches in other cities and in the region 4
  5. 5. The KSE has an independent Board of Directors with representation from the Members & the Corporate Community• Consists of 10 members  5 elected member directors  4 non member directors appointed by SECP  Represent leaders of the corporate community• Managing Director is ex-officio member of the board• Chairman is elected by board out of non member directors• The BOD meet once a month to debate policy and review performance• A number of Board committees also meet on a regular basis to advise management on adopting best practices
  6. 6. Stock market regulatory authorities actively monitor market• The Securities and Exchange Commission is the regulatory authority in Pakistan which vigilantly monitors and control the market.• To develop a fair, efficient and transparent regulatory framework, based on international legal standards and best practices for the protection of investors and mitigation of systemic risk.• On site inspections• Analyzes compliance of brokers and agent• Brokers to provide net capital balance and other material informations• Companies registered with SECP requires to full fill post incorporation statutory and legal requirements 6
  7. 7. No Restriction or Penalties on Repatriation of Capital and Income for International Investors• Most liberal Foreign Investment Regulations in the world.• Government undertook a comprehensive program of radical economic reforms including liberalization, privatization, and deregulation to bring the economy into a fully market-oriented system for capturing the potential of the private sector in all areas of economic activity.• Foreigners are at with the domestic investors.• Foreigners at any time repatriate the currency from which the investment was originated including profits.• Creditors of an industrial undertaking may repatriate foreign currency loans and interest thereon 7
  8. 8. Fair and non-prejudicial Treatment of Minority Shareholders• minority shareholders are sufficiently protected under various provisions of the Companies Ordinance, 1984 and Listing Regulations• shareholders holding 20% of the issued share capital may file complain with the registrar of companies about the conduct of the company which is in violation of the memorandum of the company, the registrar may make an application to the Court by petition for an order of winding up of the company.• shareholders / acquirer, holding at least 12.5% voting shares, may request SECP for holding fresh election of directors.• application of members holding not less than 20% of the voting power in the company the Court may within thirty days of the date of election, declare election of all directors or any one or more of them invalid if it is satisfied that there has been material irregularity in the holding of the elections and matters incidental or relating thereto”.• Under Code of Corporate Governance, representation of minority interest on the Board of Directors is encouraged. Minority shareholders as a class are facilitated to contest election of directors by proxy.• At the time of listing of new companies, Exchange ensure sufficiency of public interest and also the minimum requirement of listing / public offer of shares is fulfilled, which at present ranges in between 25% to 50% of the paid up capital of the companies 8
  9. 9. No Restriction on foreign ownership• No restrictions of acquiring 100% ownership of a company by foreigners. Allsectors are open to FDI with equal treatment of local and foreign investors.•100% foreign equity allowed, and royalties, franchise fees, capital, profits,dividends etc all fully re-patriable.•World Bank in its report “Doing Business 2007” has ranked Pakistan at 74th, forease of doing business • Pakistan has had considerable success in attracting FDI in FY06, a large part ofthe FY06 FDI comprised receipts from privatization of public sector assets. •The Government of Pakistan, in the cases of dis-investments and privatization ofgovt. owned companies, dis-invested the shares with change of management infavour of foreign investors.
  10. 10. Free and well-developed Equity Market• Equity market is well developed and totally free & restriction-less for all investor local as well as foreigners.• having fully automated trading system with separated Central Depository and clearing company• KSE is FIX Compliant.• state-of-the-art computerized trading system known as Karachi Automated Trading System (KATS).• Internet based routed trading facility• each and every order/ trade is duly logged & recorded, with pre-trade client- wise margins verification system effective at order level.• Unique Global Identification Number (UIN) has also been introduced 10
  11. 11. Free and well-developed Foreign Exchange market•Banks and leading Brokerage Houses are active players in the “inter-bank foreignexchange market•provide comprehensive foreign exchange products and services through theirnetwork.Foreign exchange business in Pakistan is governed / regulated under ForeignExchange Regulations.Exchange Policy Department (EPD), of the State Bank of Pakistan is responsiblefor overall stability of the foreign exchange market 11
  12. 12. Custody and Settlement •Settlement – Rare incidence of failed trades Custody – sufficient competition to ensure high quality custodian services•Central Depository Company of Pakistan provides complete and secure system toits clients, ensures smooth and risk free settlement of security transactions in anefficient and cost-effective manner comparable to best international practices.•Experts of the renowned international firm Price Waterhouse conducted the study,sponsored by the United States Agency for International Development (USAID). 12
  13. 13. Securities Lending is permittedLeverage product Securities lending and borrowing is available through theclearing company .Settlement – Free deliveryCustody – Omnibus account facilities available to international investors 13
  14. 14. Dealing Landscape• Brokerage – Sufficient competition - ensure high quality broker services• Exchange Members / brokerage houses offer highly competitive services to investors/clients world wide.• Many providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services.• Good corporate governance, professionalism, and comprehensive code of ethics are overseen in many firms by an independent compliance manager 14
  15. 15. Transaction costs – reasonable and competitive• Brokers’ commissions on transactions are freely negotiable between the brokers and clients.• Transaction costs have been significantly lowered after on-line trading was introduced. Due to the price competition, brokerage commissions for on-line trading continued to be lowered.• Stamp duty: There is no stamp duty for transfer settled through the Central Depository System, however, there is a one-time stamp duty at the rate of One Paisa per share at the time of deposit of securities in the CDS. 15
  16. 16. Short sales permitted• Short selling is permitted under the regulations for short selling under ready market, 2002, of the Karachi Stock Exchange (guarantee) LimitedOff exchange transaction permitted• Off- Market transactions are permitted. However, same-day reporting to the exchange of these off-market trades is mandatoryTransparency – market depth information/ visibility and timely trade reporting• Market depth information is available to all KATS terminal, showing the list of best bids and offers and full depth of the order book without disclosing the market participants.• KATS provide three distinct windows to gauge the depth of the order book, namely Market by Price (MBP), Market by Order (MBO) and Market by Symbol (MBS). 16
  17. 17. DerivativesDeveloped Derivative market• Single Stock Futures Contracts have been traded successfully in KSE since 2001.• Single stock Cash-settled Contracts are also introduced.• Stock Index future contract also introduced from November 5 2007.• Trade able sector indices• Options on index and single stock will be introduced shortly.• ETF 17
  18. 18. Dispute Resolution• Dispute resolution mechanism is provided by the Exchange through well defined Arbitration Process enshrined in the General Regulations of the Exchange. Any disputes between Members between any of the Members and their constituents/clients, or between any of the Members and their authorized agents or between authorized agent(s) and their constituents/clients in connection with the trade or transaction at the Exchange and is not otherwise settled amicably, are to be referred to arbitration under General Regulations of the Exchange 18
  19. 19. 2008-2009: Recapping Performance In 2008 KSE, in line with global markets, saw a significant decline in returns as world markets crashed.Countr Index January – December 2008 ReturnJapan Nikkei 225 -42.1%United Kingdom FTSE 100 -52.4%India Sensex 30 -52.4%Pakistan KSE 100 -58.3%China Shanghai -65.4% Showcasing its resilience KSE rebounded in 2009 in line with global and regional markets Country Index January – December 2009 Return India Sensex 30 81.03% China Shanghai 79.98% Pakistan KSE 100 60.05% United Kingdom FTSE 100 21.78% Japan Nikkei 225 19.04% 19
  20. 20. KSE in 2011E vis-à-vis other marketsCountry Index January – Dec 2011Thailand Set -0.72%United Kingdom FTSE 100 -5.55%Pakistan KSE 100 -5.61%Japan Nikkei 225 -17.34%China Shanghai -21.68%India Sensex 30 -24.64% 20
  21. 21. 2010: Performance 2010 Regional Market ComparisonCountry Index January – Dec 2010 ReturnTokyo Nikkei 40.6%Pakistan KSE 100 28.08%India Sensex 30 17.43%United Kingdom FTSE 100 9.79%Japan Nikkei 225 -3.01%China Shanghai -14.31% 21
  22. 22. 2012: Performance 2012 Regional Market ComparisonCountry Index January – June 08, 2012 ReturnKSE 100 INDEX 19.48%BANGKOK SET 9.93%US NASDAQ COMP. 8.67%BOMBAY BSE 30 8.18%CHINA SHANGHAI COMP. 3.73%SINGAPORE STRAIT TIMES 3.46% 22
  23. 23. Strong Affiliates to develop the Capital MarketsIn order to continue to strengthen the capital markets in Pakistan, over theyears, the KSE has undertaken significant strategic investments with keyCapital market institutions KSE ShareholdingCentral Depository Pakistan’s leading Depository 39.81%Company and Custodian of SharesNational Clearing Pakistan’s centralized Clearing 47.06%Company and Settlement companyNational Commodity Pakistan’s first electronic 27.12%Exchange commodity exchangeJCR-VIS Credit JCR-VIS Pakistan’s premier credit rating 12.50%Rating Company agency 23
  24. 24. Agreements with leading Regional ExchangesCooperation between exchanges is essential in order to help resolveglobal liquidity and risk management issues 24
  25. 25. International Relations• In order to have a co-ordinated approach to resolve global liquidity and risk management issues and engage in knowledge transfer programs, the KSE is also a part of the following international organizations and associations: – World Federation of Exchanges – South Asian Federation of Exchanges – Federation of Euro-Asian Exchanges – International Organization of Securities Commissions KSE also held Chairmanship of the South Asian Federation of Exchanges for 2009-10 25
  26. 26. The Exchange’s ongoing commitment to youWe are committed to supporting you every step of the way andfor this purpose, we have a team of experienced individuals toassist you with any queries that you may have.Visit our website at us: +9221-111-001-122Email Address: Address:The Karachi Stock Exchange (Guarantee) Limited,Stock Exchange Building,Stock Exchange Road,Karachi