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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 Manual handling of investors accounts had become outdated.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 challenge—because 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.