Cover Story
From Shamim Ahmed Rizvi, Islamabad
Jan 24 - 30, 2000
The fiscal year 1998-99 proved to be a
historic year for the Islamabad Stock Exchange (ISE). It touched the highest points in its
history during this year.
In his annual review report the outgoing
chairman of the ISE, Mr. Farooq Zafar said, the fiscal year 1998-99 will always be
remembered, since it was during this period that our stock market indices touched record
lows, around mid-July 1999, as a consequence of the economic turmoil resulting from the
post nuclear test sanctions imposed by the West. The record erosion in equity values
during the said period was accompanied by an unprecedented increase in the turnover of
shares traded. The average turnover in June 1998 was about 2 million shares per day,
whereas the average turnover in June 1999 was in excess of 7 million shares per day. A
peak turnover of 23.1 million shares was recorded on June 17, 1999. Subsequent data
provided by ISE showed peak volumes in excess of 20 million shares per day in Jan 2000.
The phenomenal growth in trading volume is
attributable both to the upgraded automated trading system as well as the tireless efforts
of all the active ISE Members towards promotion of the stock brokerage trade.
The Islamabad Stock Exchange has
registered tremendous growth in its business volume since it shifted to computerised
trading in Sept. 1997. Previously the main impediment from which all stock exchanges in
Pakistan, were suffering, was the time consuming and inefficient working system which
blocked real growth in trade volume. Manual handling of investors accounts had become
outdated. It had to introduce automation in the trading house. Without automatic trading
system it is not possible to meet the demand of growing number of investor's in the near
future. So the ISE was the second in line to switch-over to computerisation immediately
after Lahore Stock Exchange. Karachi Stock Exchange, the biggest exchange in the country,
introduced automation later on.
Islamabad Stock Exchange in a short span
of 7 years has successfully developed into a dynamic and vibrant financial market in the
northern region of Pakistan, which was, till recently known only for political,
bureaucratic and real estate activity. Credit for this remarkable performance which was
noted and acknowledged by other exchanges as well as experts in the field goes to the
highly dedicated, efficient and innovative teams of chairmen and Boards of Director who
ran the affairs of the ISE. It is because of their untiring efforts that ISE has carved
out for itself the most prestigious position in the country despite being a new entrant in
the stock market. The newly elected Chairman Mian Mohammad Akram, an eminent member of
previous Boards of Director and a former vice president of ISE has assumed his
responsibilities with the same zeal and dedication. Under the reforms introduced by the
Security and Exchange Commission (formerly CLA) making it mandatory for all the stock
exchanges to engage a professional from the private sector as full time Managing Director,
ISE was fortunate to have the services of a competent banker Mr. Gul Niazi as its MD.
In his annual report the outgoing
Chairman, Mr. Farooq Zafar informed the members of ISE that the Islamabad Stock Exchange
computerized Trading System (ISECTS), which brought about the efficiency, resulting in the
manifold increase in trading volumes, started slowing down in its response time on days
the turnover exceeded 10 million shares. Responding to the situation, the Computer and
Modernization Committee of the Exchange took a decision to upgrade the Computerized
Trading System to the same level as that of the other two Stock Exchanges of Pakistan.
Fortunately the cost of the high tech software and hardware has become more affordable and
we have been able to acquire the requisite software and branded hardware at less than one
quarter of the cost it used to be two years ago.
"Since early 1999, we have had
several meetings with Arthur Anderson, the international consultants sponsored by the
Asian Development Bank, for the establishment of the National Clearing and Settlement
System. The setting up of NCSS would greatly reduce the inter stock exchanges remittance
of funds since the settlements are to be based on a netting off basis. This project is
targeted to be operational by the end 2000", he added.
Commencement of construction on the new
building project was delayed as it took for longer than expected to get approval for the
architectural plans of the building from the concerned authorities. I am pleased to report
that the site office has been erected. Soil testing, pile testing as well as excavation of
the plot have been completed.
I would like to conclude my review by
expressing that the fluctuating values of equities traded on an Exchange reflect
investor's confidence in the economy of the country and the fluctuating volumes of
equities traded on the Exchange reflect investor confidence in the functioning of the
Stock Exchange. Whereas our trading volume in 1992-93 was about 40,000 shares per day, in
1998-99 the volume exceeded 7 million shares per day, an almost 200 fold increase. This
level of investor confidence in our exchange can be viewed as a source of strength and yet
at the same time it also poses a challengeÑbecause to sustain it is level of growth will
require relentless regulatory vigilance by the ISE management and tireless efforts by all
ISE members to further develop the market.
The new Chairman, Mian Mohammad Akram, who
has been associated with the affairs of ISE as Vice Chairman and Director from the very
beginning, while talking to this correspondent vowed to continue his efforts to further
improve the image of ISE. Mian Mohammad Akram said that working of ISE has improved a lot
because of its automation programme which is being further updated through the
establishment of national clearing and settlement system which will facilitate inter
exchange transactions. A lot of reforms carried out by security and exchange commission
coupled with constant vigilance and monitoring the working of the stock exchanges had
become much safe and transparent. The confidence of the investors has been restored
because of the various measure taken to protect the interest of the small investors by the
SECP. The increased confidence of the investors is reflected in the recent upsurge in the
capital markets throughout the country. He welcomed the announcement of the federal
Finance Minister that most of privatisation and off loading of government shares in the
state run enterprises will be done through the 3 stock exchanges. This will provide a
tremendous boost to the capital market, Mian Akram hoped.
