KSE: ONLINE TRADING FROM SEPTEMBER
KSE has already provided a brokerage house to establish a gateway house from its own resources which will start facilitating online trading shortly
By SYED M. ASLAM
Apr 28 - May 04, 2003
The biggest bourse of the country, Karachi Stock Exchange, is in the final stage of making arrangements to facilitate Internet trading as early as September this year, the Managing Director of KSE, Moin M. Fudda, informed journalists at a press briefing here on April 23. The KSE will also have a new attractive listing new month, the subscription of which will be Rs 200 million, he added.
He said that the KSE has already provided a brokerage house to establish a gateway house from its own resources which will start facilitating online trading shortly. "In addition, the KSE has acquired the necessary software to facilitate Internet trading by September hopefully and some 30 brokerage houses have expressed interest to use the facility to conduct real-time on-line trading."
He said that the ongoing reforms at the KSE is the part of the ongoing capital market reforms in the country. Not only the KSE Board has been restructured to reduce the number of members from 17 till 1997 to 18 from 1998-2002 and only 10 including the chairman and the MD at present but latest technology has also been inducted to ensure better risk management at all stages of the trade. All transactions at KSE are now fully automated and manual settlement has been replaced by electronic settlement; Carry on Trading (COT) is screen-based computerized to monitor the capital adequacy of the brokers to ensure that they don't go breach it. "Since February no case is reported of any broker going beyond the capital adequacy which is now monitored every hour. Our online system just cannot be breached by the brokers."
Moin said that the KSE has also benefited from the transparency in the corporate sector — the quality of audits has improved significantly, the listed companies are regularly issuing quarterly financial reports as required by the SECP and they are also paying timely dividends to the share holders.
He said that KSE has slashed the cap of COT rates to 18 per cent per annum for the top 30 scrips and 24 per cent per annum for all others because the 50 per cent cap of the COT rates was the main reason for the problems which shook the market on January 15. The COT periods has also been extended to 10 working days.
He said that much has changed at the KSE and the introduction of T+3 settlement system and risk management system such as on-line market surveillance, the capital adequacy monitoring and National Clearing & Settlement System along with the measures aimed at bringing the transparency have helped to make it "The best performing market of the world." Moin would definitely had been much more glad if the KSE-100 Index which touched the all-time high of 2,967.49 points on Monday April 21 had managed to cross the 3,000 point barrier by Wednesday, the day of the press briefing.
However, the KSE has indeed performed extremely well between April 21, 2002 and April 21, 2003 compared to other bourses in the region during the same period. According to a chart provided to the journalists the KSE-100 Index gained 59.21 points depicting 59.21 per cent increase during this period compared to 32.42 points by the Colombo All Share Index. The rest of the markets in the region, including china, Mumbai, New York, Kuala Lumpur, Hong Kong, London, Singapore and Tokyo were in the red. The value of scrips decreased by 3.91 per cent in China, 12.37 per cent in Mumbai, 18.80 per cent in New York, 21.43 per cent in Kuala Lumpur, 23.76 per cent in Hong Kong, 25.83 per cent in London, 26.55 per cent in Singapore and 30.78 per cent in Tokyo during the period under discussion.
Moin attributed the attractive dividend yield as the major reason for the interest in the stock market. "Equities offer an average return of 11.54 per cent while SSCs and Treasury Bills offer a much lower returns of only 9.12 and 2.69 per cent respectively over a twelve-month period."
Moin said that the KSE introduced its own home-grown software for automated transaction on February 28 and an improved version of it was installed last week. "Many countries in the Middle East have shown interest to buy this particular software and we expect that we would be able to get a number of orders to export to some of these countries."
What about the hardware? "Over the years trading volume at the KSE has increased tremendously — from an average daily turnover of a mere one million shares in 1990 to over 250 million at present. However, this increase in the volume of shares has not been matched by neither the induction of the needed hardware nor the upgrading of the existing one. The KSE has now acquired one machine and is in the process of acquiring two more to induct the latest hardware necessary to handle the increasing volume of trading."
Moin said that trading in TFCs is negligible and KSE is in consultation with the central bank, the State Bank of Pakistan, about measures to increase its volume. "By end of this year the KSE will be facilitating options and index trading."
Moin said that there is much depth and strength in the market and yet many of the banks are not investing as much in it as they should be because the cap about just how much they can invest in the stock is made by the SBP. "However, four big banks — Habib, National, Muslim Commercial and PICIC will be offering various margin financing products."