This document provides information about capital markets in Pakistan. It defines capital markets and describes the primary and secondary markets. It then discusses the role of stock exchanges in Pakistan, including the Lahore, Karachi, and Islamabad stock exchanges. It also outlines the mission, vision, objectives and functions of the Security and Exchange Commission of Pakistan (SECP) which regulates capital markets. Finally, it briefly discusses stock indices and foreign portfolio investment.

1. UNIVERSITY OF EDUCATION
BANK OAD CAMPUS, LAHORE.
SUBMITTED TO:
MAM EZZAH BATUL
SUBMITTD BY
FARIHA IJAZ (1014)
SHAZMINA LAIQUAT (1048)
KHADIJA SHAFIQUE (1025)
HALIMA SADIA (1057)
NIDA ASGHAR (1033)
PROGRAMME:
BBA HONS 5TH SEMETER
SUBJECT
PAK ECONOMY

2. Content:
1. Capital market
 Definition
 Types of capital Market
 Primary Market
 Secondary Market
 Role of capital market
2. Stock exchange
 Importance or function of stock exchange
 Lahore stock exchange
 Karachi stock exchange
 Islamabad stock exchange
3. Security and exchange commission of Pakistan:
 Mission, vision & strategy
 Objectives
 Function of SECP
4. Stock Index
5. Foreign Portfolio Investment

3. Introduction of Capital Market
A very important area of the financial services industry is the capital markets. The capital
markets are fundamental to the economy of the country. It promotes economic growth by
providing corporations and governments access to capital which enables these organizations to
invest in businesses, create jobs, and build infrastructure.
What are 'Capital Markets?'
Definition: Capital market is a market where buyers and sellers engage in trade of financial
securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as
individuals and institutions. Capital markets are markets for buying and selling equity and debt
instruments. Capital markets channel savings and investment between suppliers of capital such
as retail investors and institutional investors, and users of capital like businesses, government
and individuals. Capital markets are vital to the functioning of an economy, since capital is a
critical component for generating economic output.
Types of capital market:
1. Primary Market
2. Secondary Market
PRIMARY MARKET:
Capital markets include primary markets, where new stock and bond issues are sold to investors,
and secondary markets, which trade existing securities. This market is concerned with new
issues. Therefore, the primary market is also called NEW ISSUE MARKET.
The money collected from this market is generally used by the companies to modernize the plant,
machinery and buildings, for extending business, and for setting up new business unit.
SECONDARY MARKET:
The secondary market is that market in which “the buying and selling of the previously issued
securities is done.” The transactions of the secondary market are generally done through the
medium of stock exchange. The purpose of the secondary market is to create liquidity in
securities. Majority of the trading is done in the secondary market. This market comprises of
Equity Market and Debt Market
Role of Capital Market

4. The primary role of the capital market is to raise long-term funds for governments, banks,
and corporations while providing a platform for the trading of securities
For companies, there are many reasons why they would want to raise capital. It is
typically to finance:
 Startup businesses – investing in new and innovative ideas
 Ongoing operations – one reason a company may have to do this is because of an
unexpected decline in revenue
 Expansions – at home or abroad, with existing or new products/services,
companies often need to borrow in order to grow
The reason why a person or organization would want to provide capital is more
straightforward. Those who provide capital to borrowers expect to make a profit from
their financing efforts.
STOCK EXCHANGE
According to Merriam Webster:
“An association of people organized to provide an auction market among themselves for
the purchase and sale of securities.”
Stock Exchange (also called Stock Market or Share Market) is one important constituent of
capital market. Stock Exchange is an organized market for “the purchase and sale of industrial
and financial security”. It is convenient place where trading in securities is conducted in
systematic manner i.e. as per certain rules and regulations.
According to MARSHAL; "Stock exchange are not merely the chief theaters of business
transaction, they are also barometers which indicate the general conditions of the atmosphere of
business."
Importance or Functions of Stock Exchange:
We discuss about major functions of stock exchange under these headings:-
1. Liquidity:
The main function of stock market is to provide ready market for sale and purchase of securities.
The presence of stock exchange market gives assurance to investors that their investment can be
converted into cash whenever they want. The investors can invest in long term investment
projects without any hesitation, as because of stock exchange they can convert long term
investment into short term and medium term.

5. 2. Economic Barometer:
A stock exchange is a reliable barometer to measure the economic condition of a country. Every
major change in country and economy is reflected in the prices of shares. The rise or fall in the
share prices indicates the boom or recession cycle of the economy. Stock exchange is also known
as a pulse of economy or economic mirror which reflects the economic conditions of a country.
3. Increasing Govt. Funds:
The govt. can undertake projects of national importance and social value by raising funds
through sale of its securities on stock exchange.
4. Stock exchange Protect investors:
As only genuine companies are listed and the activities of the stock exchange are controlled, the
funds of the investors are very much protected.
5. Facilitates public borrowing:
Stock exchange serves as a platform for marketing Government securities. It enables government
to raise public debt easily and quickly.
6. Promotion of the habit of saving:
Stock Exchange provides a place for saving to general public. Thus it creates the habit of thrift
and investment among the public. This habit leads to investment of funds incorporate or
government securities. The funds placed at the disposal of companies are used by them for
productive purposes.
Lahore Stock Exchange:
History: The Lahore Stock Exchange (Guarantee) Limited came into existence in October
1970, under the Securities and Exchange Ordinance of 1969 by the Government of Pakistan in
response to the needs of the provincial metropolis of the province of Punjab The LSE has 152
members of which 81 are corporate, and 54 are individual members. The LSE was the first stock
exchange in Pakistan to use the internet and currently 50% of its transactions are via the internet.
Islamabad Stock Exchange was the youngest of the three stock exchanges of Pakistan and
is located in the capital of Islamabad. Islamabad stock exchange (ISE) was incorporated as a
guarantee-limited company on 25 October 1989 in Islamabad capital territory with the main
object of setting up of a trading and settlement infrastructure, information system, skilled
resources, accessibility and a fair and orderly market place that ranks with the best in the world.
It started trading in July 1992There are 250 securities listed in Islamabad Stock Exchange at the
moment
The Karachi Stock Exchange Limited (KSE), was a stock exchange located at the Stock
Exchange Building (SEB) on Stock Exchange Road, in the heart of Karachi's Business District, I.
I. Chandigarh Road, Karachi, Sindh Province of Pakistan It is Pakistan's largest and one of the
oldest stock exchange in South Asia by market capitalization, with many Pakistani consortium as

6. well as overseas enterprises listings. Founded on September 18, 1947, Karachi Stock Exchange
Limited (KSE) is the exchange in Pakistan. It was declared the "Best Performing Stock Market
of the World for the year 2002"
Note:
These three stock exchanges (ISE, LSE, and KSE) are now merge in one stock exchange named
as Pakistan Stock Exchange PSX 2016 -of Pakistan, aimed to help reduce market
fragmentation and create a strong case for attracting strategic partnerships necessary for
providing technological expertise and assistance.
Security and Exchange Commission of Pakistan (S.E.C.P)
“The Securities and Exchange Commission of Pakistan (SECP) is the financial regulatory
agency in Pakistan whose objective is to develop a modern and efficient corporate sector and a
capital market based on sound regulatory principles, in order to encourage investment and foster
economic growth and prosperity in Pakistan”.
Its VISION is the development of modern and efficient corporate sector and capital market,
based on sound regulatory principles.
MISSION is to develop a fair, efficient and transparent regulatory framework, based on
international legal standards and best practices
STRATEGY is to develop an efficient and dynamic regulatory body, ensures proper risk
management procedures in the capital market, and protects investors through responsive policy
measures and effective enforcement practices.
Function of security exchange commission of Pakistan:
These are the some following functions:
 Regulating the issue of securities
 Regulating the business in Stock Exchanges and any other securities markets
 Prohibiting fraudulent and unfair trade practices relating to securities markets
 Supervising and monitoring the activities of any central depository and Stock Exchange
clearing house
 Encouraging the organized development of the capital market and the corporate sector in
Pakistan

7. Objectives
 It was initially concerned with the regulation of corporate sector and capital market.
 Now it also concern with the supervision and regulation of insurance companies, non-
banking finance companies and private pensions.
 The SECP has also been entrusted with oversight of various external service providers
to the corporate and financial sector.
Stock index:
KSE 100 increased 161 points or 0.34% to 47772 on Friday December 30 from 47667 in the
previous trading session. Historically, the Pakistan Stock Market (KSE100) reached an all-time
high of 47771.53 in December of 2016 and a record low of 538.89 in June of 1990.
What is 'Foreign Portfolio Investment - FPI?'
Foreign portfolio investment (FPI) consists of securities and other financial assets passively held
by foreign investors. It does not provide the investor with direct ownership of financial assets
and is relatively liquid depending on the volatility of the market.
This is an investment that investors make in our country, and that gives them only
OWNERSHIP right and not MANAGEMENT right.
The purpose of this type of investment is To Obtain the high rate of return foreign investors can
achieve this task with the help of passive holding of shares and trading of securities in the capital
market. It is the best way to enhance the liquidly position of the Economy and another purpose of
this type of investment are to increase the foreign reserves. Foreign Direct investment is also
useful to reduce the risk. It has main role for the development of host Country. It is also helpful

8. to increase the new funds for the improvement of the economy. In the current economic
conditions, foreign direct investment is known as the one of the main tool for the capital inflows.
Now a day, market risk is very high due to political instability in such e condition foreign
investors are avoiding investments in Pakistan.
Government of Pakistan should focus on the FPI for the attraction of the foreign investors.
Although, FPI nature is short terms but it the best way to attract the foreign investors.
References:
https://www.quora.com/WhY-is -foreign-direct-investment-FDI-and-foreign-portfolio-
investment-FPI--is-better-for-the-developing-countries
http://www.ksestocks.com/MarketSummary
https://www.google.com.pk/#q=current+stock+index+of+pakistan
https://www.google.com.pk/?gws_rd=cr,ssl&ei=hCZtWNqsIo27UOPVm_gC#q=karachi+stock+
exchange+history+
http://www.investopedia.com/terms/f/foreign-investment.asp
https://www.google.com.pk/search?biw=1024&bih=613&q=role+of+secp+in+corporate+govern
ance&sa=X&sqi=2&ved=0ahUKEwjtgYLFiJXRAhXH1hoKHZDLBMEQ1QIIWSgD#q=pakist
an+stock+exchange+live+index