After six consecutive years of bullish run at Karachi Stock Exchange, the bench mark KSE 100 Index closed the year FY08 at 12289.03 which is 11% lower than last year s closing of 13772.46. Record after record was made during the year in spite of soaring oil and commodity prices. The KSE 100 index reached an all time high record of 15676.34 points on April 18, 2008. During the period July June 7 new companies listed their shares on the Exchange adding over US $ 209.15 million to the listed capital. The KSE also listed 7 debt instruments of US $ 344.32 million. The average daily turnover of shares during the period was 238.15 million and the market capitalization was US $ 55.35 billion on June 30, 2008.
The economic liberalization and reforms has helped Pakistan emerge as an open and liberal economy. Foreign investors enjoy equal treatment with domestic investors and often assigned preferential treatment to ensure swift entry. Due to these reasons Pakistan managed to attract significant investment. Over half of the banking assets are with global banks. Telecom Operators are managing bulk of the mobile business and the subscribers has risen substantially. Pakistan has managed to privatize its power sector both generation and distribution sectors have been offered to private sector. The process of economic liberalization has been facilitated by the smooth privatization of public enterprises that has been a key agenda of all the successive Governments. Pakistan successfully floated sovereign bond issues and GDRs for some companies which helped to build the reserves of above $ 16 billion, on June 30, 2008 the foreign exchange reserves were $11.3 billion.
Over the past few years KSE has done much to develop and promote Pakistan s capital market by introducing innovative new products and new risk management system to increase transparency and to enhance the investors confidence.
KSE has a fully automated trading system with T+2 settlement system whereby all trades must settle on the second day after the trade. A VaR based margining system was introduced in place of a slab based Risk management system. The new RMS included, amongst others, a new netting regime; a margining system based on Value at Risk (VaR) and Capital Adequacy. KSE has also adopted the FIX protocol (Financial Information Exchange) for both trading and market data. Due to this technology, KSE will be able to attract local, regional and global liquidity by providing KSE members to seamlessly interact with their automated trading platform and offer access to their international trading partners.
Unique Identification Number was introduced to provide a traceable link between every order entered at the trading system of the Exchange. The UIN system allocates each individual client and trade a separate number such that a record of each client s trade is stored and can be accessed at any time. The UIN system has significantly enhanced the risk management at client level and also considerably improved the Exchange s ability to monitor the market.
The KSE also introduced Client Level Netting system: This system was developed based on the core KSE business requirement of exposures, profits, losses and margins to be calculated client-wide, scrip-wide and market-wide on the outstanding buy and sell positions.
KSE also launched another derivative product Stock Index Futures Contract at the beginning of April. This marks a momentous achievement for the KSE. However, trading is yet to pick up in this product. KSE also provides real time data and historical data on stock trading. It has been decided to package the data into special products so as to provide media, retail investors and financial institutions with data that better caters to their needs.
In the coming year, the KSE plans to introduce new products into the market, to further cater to the growing needs of its investors and help develop Paksitan s capital markets. KSE will be introducing: Exchange Traded Funds, Sector Based Index, Islamic Index and Options. Our efforts are also directed towards the demutualization of the Exchange.