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New companies listing, rule at PSX likely to give an edge to corporate sector

As on January 24th, 2017 there are 576 companies listed in Pakistan Stock Exchange (PSX) and the total market capitalization is Rs9,969.782 billion. The listing is done on the basis of strict rules and regulations laid out by Securities Exchange Commission of Pakistan (SECP) and the management of Pakistan Stock Exchange Limited.

All the listed companies are categorized in various main business sectors. The total sectors listed on Pakistan Stock Exchange, which contributes towards the market capitalization and all the listed companies (excluding their future contracts) are divided among these. Rest of the non contributory sectors allocated for indexes, futures, bonds etc.

The new companies law aims at introducing a number of reforms in the corporate sector of Pakistan. The arrival of foreign partners in the Pakistan Stock Exchange (PSX) had been well received in the market and stock index is likely to show even better performance in the near future.

The implementation of demutualization of stock exchange was paying rich dividends and that other reforms initiatives would also yield positive results for the economy. Good corporate governance was essential for a vibrant and dynamic economy and SECP should continue to perform its positive role in this regard.

Pakistan Stock Exchange (PSX) is a great platform to raise capital for business expansion and growth. Raising capital from the capital market was more beneficial for the private sector as it also increased the value of equity capital of well performing companies.

PSX was among the 10 best performing stock exchanges of the world during 2012-15, which reflected the robust performance of the corporate sector where earnings on average have grown by over 20 percent per annum in the last five years while return on investment has averaged nearly 21 percent.

During the last 10 years, companies have raised a total amount of Rs1.160 trillion in terms of equity capital and debt from stock market, which showed that the capital market was playing an important role in meeting the long term financing needs of companies for growth.

An integrated PSX would be highly beneficial as it would provide a nationwide footprint, attract more investors and provide maximum people better access to the capital market.

WAKEFULNESS

Iran has 4 million investors in the capital market; Bangladesh, 2 million and India, 22 million; but in Pakistan this figure was barely 0.2 million, which was far less than the real potential

Lack of knowledge among people and the business community about the importance of stock market was the main reason of low investment and that there was a great need to create more awareness in people about the capital market.

PSX should continue to play positive role for serving the investors and industry for economic development of the country.

The role of stock exchange was very important for the growth of private sector as it provided a good platform to raise capital for businesses, mobilize savings for investment and create investment opportunities for small investors

Capital markets should come up with some good incentives for SMEs so that SMEs can rise funding from capital markets easily for growth and for starting new projects.

Many investors have lost billions of rupees in the capital markets due to market crash and that PSX and SECP should formulate strong rules and regulations to ensure full protection of investors from market abuse so that investors can invest in these markets with confidence.

For the selection of best 25 performing companies for both the years of 2014 and 2015 among the 559 companies listed at the national bourse, it was mandatory for companies to meet three ‘prerequisites’.

First, a minimum dividend distribution of 30 percent (including at least 15 percent cash dividend) for the year; second, the shares of the company had to be traded 50 percent of the total trading days during the year, and third, that the company should not be in the ‘Defaulters Segment of the Exchange’ or trading of its shares were not suspended on account of violation of laws and regulations.

The PSX has been striving to revise and update the criteria for selection to ensure that only those companies are honored, which have not only excelled in performance but are also serving the interest of their shareholders, in the best possible manner.

The companies that fulfill the above prerequisites are then selected on the basis of highest marks obtained as per following criteria: Capital efficiency (27.5 percent marks); profitability (37.5 percent marks); free-float of shares (7.5 percent); turnover of shares (2.5percent); corporate social responsibilities (2.5 percent) and transparency and investors relation (22.5 percent). All of that makes a tally of 100 percent.

This award function is held to acknowledge the outstanding performance of listed companies as these entities have not only shown excellent performance in the area of corporate profitability but also shared those with their shareholders, thereby, remaining favorites of stock market investors through their shares volumes. These companies have also adhered to the principles of good corporate governance set by the Pakistan Stock Exchange for selection of Top 25 listed companies every year.

They have been recognized and appreciated by the Exchange as they are the scions of Pakistan’s industrial, financial and services sectors, which will take the Pakistani capital market forward and help it in achieving higher growth targets.

A quick look at the selected top 25 companies for the years 2014 and 2015 reveals that there are 17 companies being recipient of the award for both the said years. They are Fauji Fertilizer Company Limited, Pakistan Oilfields Limited, Nestle Pakistan Limited, Fauji Fertilizer Bin Qasim Limited, Pakistan International Container Terminal Ltd, Attock Petroleum Limited, Hinopak Motors Limited, Atlas Honda Limited, Colgate-Palmolive (Pakistan) Limited, Arif Habib Limited, Bata Pakistan Limited, Security Papers Limited, Millat Tractors Limited, Service Industries Limited, Atlas Battery Limited, Biafo Industries Limited, and Habib Bank Limited.

Pakistan is on the path of rapid progress after higher GDP growth and private sector borrowing, booming real estate and stock market’s attractive direction. These achievements have made Pakistan an attractive market for domestic and foreign investment.

The available production capacities in various sectors (cement, steel, automobiles & fertilizers) are being utilized at the optimum level as the present production capacities are being fully utilized.

The US$46 billion China-Pakistan Economic Corridor (CPEC) project that will pass through Gilgit-Baltistan region in the north of Pakistan to reach Chinese-operated Gwadar port in the country’s south is envisioned to be a supporting factor for transforming the country’s economy and help bridge Pakistan’s power shortfall. With CPEC on the horizon, Pakistan is entering an era of real investment creating a trickledown effect for the good of masses in the country.

PAST RECORDS

Fauji Fertilizer Company FFC has an enviable record of seizing a position among the top 25 companies, consecutively for 22 years since 1994. For six years (2010 to 2015), The FFC) has stood first among the top 25.

Out of 25 award winning companies for the year of 2014; 4 companies are from Automobile Assembler sector, 3 each are from Chemical, and Insurance sectors, 2 each are from Fertilizer, Oil & Gas Exploration Companies, Leather & Tanneries, and Commercial Banks sectors, and lastly, one each from Food & Personal Care Products, Transport, Investment Banks/Investment Companies/ Security Companies, Paper & Board, Close End Mutual Fund, Cement and Automobile Parts & Accessories sectors.

Similarly out of the 25 award winning companies for the year of 2015; 4 companies are from Automobile Assembler sector, 3 companies each are from Fertilizer, and Commercial Banks sectors, 2 companies each are from Food & Personal Care Products, Oil & Gas Exploration Companies, Leather & Tanneries, Chemical, and Automobile Parts & Accessories sectors, and lastly, 1 company each is from Transport, Investment Banks/Investment Companies/Security Companies, Paper & Board, Textile Composite and Cement sectors.

After the introduction of Code of Corporate Governance as a part of Exchange’s Listing Regulations, there has been a significant improvement in the performance of listed companies. The distribution of awards encourages entrepreneurs to improve their systems and method of doing business with effective corporate governance. These best performing companies’ awards are an attempt by the PSX to encourage shareholders’ confidence and develop a competitive spirit amongst the listed companies on the Exchange and to recognize their contribution towards the promotion of investment in the country, that are also providing job opportunities, producing goods and services and contributing taxes to the exchequer.

There has been phenomenal growth in KSE. Volume of KSE 100 Index increased 93 points or 0.19% to 49,969. Historically, the Pakistan Stock Market (KSE-100 Index) reached an all time high of 49,968.92 in January of 2017 and after record low of 538.89 in June of 1990.

The Karachi Stock Exchange 100 Index is a major stock market index which tracks the performance of largest companies by market capitalization from each sector of Pakistani economy listed on the Karachi Stock Exchange. Since October 15th, 2012 it is a free-float index.

The KSE-100 Index has a base value of 1000 as of November, 1991. This provides Pakistan Stock Market (KSE 100) — actual values, historical data, forecast, chart, statistics, economic calendar and news. The index performance shows the local investors’ confidence in the market.

A delegation from a Chinese-led consortium, made up of China Financial Futures Exchange, Shanghai Stock Exchange, Shenzhen Stock Exchange and two other firms, formally signed documents to buy a 40 percent stake in the Pakistan Stock Exchange. The deal was made public in December last year. The benchmark index soared 61 percent over the last 12 months, making it one of the world’s top performing indexes.

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