The board is conscious of further improving the governing standards of the exchange and wants to see professional management works pro-actively and with more independence.

KHALID BUTT, Bureau Chief, Lahore
Dec 25 - 31, 2006

The fiscal year 2005-06 has been a year of continuing economic growth despite the pressures of rising oil prices and devastating earthquake of October 2005, says Chairman LSE Ibrar A. Mumtaz.

In an interview he stated that Pakistan's economy has grown at an average rate of over 7.5% in the last three years, thus positioning itself as one of the fastest growing economies in the Asia region. The growth momentum has been sustained by sharp pick up in overall investment reaching new height at 20% of GDP, strong consumer demand, highest-ever foreign direct investment flows of US$3.5 billion, continued credit demand of the private sector, double digit increase in per capita income and stable exchange rates.

Another eventful year is about to end, with the "Bulls" dominating the market and lot of optimism present in the investor community. The much-needed reforms initiated by S.E.C.P, under the advice of Asian Development Bank, have yielded positive results. The enabling environment, the capacity-building measures, infra-structural developments and adoption of code of Corporate Governance in the listed sector have gone a long way in restoring the investors' confidence.

The market is getting institutionalized, ensuring transparency and fair play to all its stakeholders. The Governing Board of Directors of L.S.E was conscious of further improving the governing standards of the Exchange and consistently encouraged that the professional management works pro-actively and with more independence. The Exchange was enriched, in terms of human capital by the newly inducted quality replacement and addition of the top management positions, like G.M., Head of Training Institute and Head of Legal Affairs. This is a classic example of Exchange's non vulnerability in the administration of its day to day affairs.

The Chairman LSE said: "In the end, I would like to express my profound thanks to the chairman, commissioners and other staff at S.E.C.P, for their continuous support and guidance, throughout the year. I would like to thank the Chairman and Managing Director of Karachi and Islamabad stock exchanges for their co-operation in various matters during the year.

"I also express my appreciation for conveners and members of various committees for their valuable contribution. Last but not the least, I also recognize with gratitude, the dedication and hard work, put in by all the staff members of the Exchange, throughout the year," he hastened to add.

Talking of the eventful year about to end, he said it has been a very hectic year with the market touching a record high of 5763 on 24th February and a low of 3710 on 15th June. Fortunately, the risk management measures practiced by the exchange as well as the members helped avoid many defaults. This in turn led to increasing investors' confidence in the exchange and its members. In terms of growth in market capitalization during FY-2006, commercial banks topped with 163%, which was fueled by 100% growth in profits during FY-2005. In FY-2005 the commercial banks recorded an increase of 78% in market capitalization. The real GDP growth during FY 06 was recorded at 6.6% as compared to 8.4% in the previous fiscal year. Main reason for this decline has been the lower agricultural production that grew by 2.5% during FY06 as against 6.7% in FY 05.

High base-effect and water problems were termed as the chief factors behind the less than expected performance of agriculture sector. The industrial sector's underperformance was mainly attributed to the textiles sector which contributes the largest share to the industrial production. The current account deficit during FY-2006 increased by 242% from US$1.52 billion to US$5.20 billion due to the 88% increase in trade deficit as a result of 31% jump in oil prices and machinery imports which amounted to more than US$3.00 billion.

Remittances and FDI rose by 10% and 13% to US$4.62 billion and US$3.50 billion, respectively. FDI included the PTCL and KESC privatization proceeds. Overall the exchange rate i.e. PKR/USD parity depreciated by 0.50% during the year whereas the forex reserves increased by 6%. Therefore, overall Balance of Payment was managed well by the government.

The fiscal deficit during FY-2006 rose to 4.20% of GDP from 3.0% in the corresponding period. The impact of earthquake added approximately 0.6% so the actual rise was 20% in the fiscal deficit which was attributed to the subsidies being offered in the wake of international oil prices, tightening of monetary policy and increase in current expenditure. The LSE's had smooth sailing throughout the year and with record high surplus after tax of over Rs.102 million has proved it to be the futuristic exchange of the country with no geographical boundaries.

"I am pleased to inform you that more than 90% of our trading volumes are originating from remote trading terminals. The success of our trading floor in Faisalabad and Sialkot has been an encouraging experience for us that will be emulated in other cities as well," he added.


Singing of a Memorandum of Understanding with the Islamabad Stock Exchange for the establishment of a Unified Trading Platform has been another historic event during the year. This will not only increase LSE members' own trading volumes but will also result in faster execution and better price discovery for the local investors. Considerable work has been done towards making it a reality by both the exchanges since the year-end.

The LSE Chairman has commended members and management of both the exchanges for taking the momentous decision that will have a far-reaching effect for the members and investors in future.


The Chairman LSE was very proud that LSE members have always welcomed change, successfully adapting to the ever-changing role of the capital markets. LSE and its members will have to gear-up for the biggest change in its history to corporatize and then demutualize our exchange into a profit generating limited company by shares from its current state of a non-profit mutually owned exchange limited by guarantee of its members.

The decision to set up training institute in Lahore was taken in 2005. By the grace of Allah, the institute has now been established. It is the first and only institute of its kind in the country. Once again the LSE has taken the lead in capital market development and innovation. The first formal course was launched on October 3 2006 and response from the members has been overwhelming. The first batch of 20 participants (employees of LSE members) have begun their month long extensive classroom and hands-on training in Trading Work Station and the Ultra Trade System.


The Chairman LSE has emphasized the importance of a true futures market with international character in the ever-growing capital market of Pakistan. He wanted the members and their employees to study and explore such instruments and make the product popular at LSE.