Oct 3 - 9, 20

At present, Pakistan has three stock exchanges at Karachi, Lahore, and Islamabad. Karachi Stock Exchange (KSE) is distinguished in terms of key indicators including listed capital, number of listed companies and daily trading volume.

During 2000-07, it has remained among the top best performing markets. During this period, listing of state-owned enterprises (SoEs) and offer of their shares to public under 'privatization for people' program attracted lot of investments.

However, the global meltdown and inability to take timely decisions caused colossal losses to investors. As the wounds healed with the passage of time, retail investors started to return to KSE, a little cautiously.

Lately, significant amount has been invested by the foreign funds but institutional investors and asset management companies (AMCs) have also emerged as major investors. Small investors have also started focusing on mutual funds that offer stable earnings as well as security of the investment.

The overall size of assets under AMCs management are close to Rs240 billion. Though new listings remained low during last three years, total listed capital grew due to issue of right shares and bonus shares.

Similarly, issue of term finance certificates remained very low but issue of over Rs220 billion sovereign Ijarah Sukuk have channelized funds of Islamic banks and Shariah compliant funds. Since the government has announced the timetable and amounts of future Sukuk subscriptions, a new zeal has been shown in deposit mobilization by the banks.

The KSE introduced four indices namely KSE-100, KSE-30, KMI-30 and all shares index. KMI-30 index has been developed after declaration of 100 companies being Shariah compliant. Shariah compliance of stocks is done under the guidance of qualified and reputed Shariah experts. For stocks to be "Shariah compliant", it must meet all the six key tests given below.

1. BUSINESS OF THE INVESTEE COMPANY: Core business of the company must be halal and in line with the dictates of Shariah. Hence, investment in securities of any company dealing in conventional banking, conventional insurance, alcoholic drinks, tobacco, pork production, arms manufacturing, pornography, or related activities is not permissible.

2. DEBT TO TOTAL ASSETS: Debt to Asset ratio should be less than 40 per cent. Debt, in this case, is classified as any interest bearing debt. Zero coupon bonds and preference shares are, both, by definition, part of debt.

3. NONCOMPLIANT INVESTMENTS TO TOTAL ASSETS: The ratio of noncompliant investments to total assets should be less than 33 per cent. Investment in any noncompliant security shall be included for the calculation of this ratio.

4. Noncompliant Income to Total revenue - Purification of Noncompliant income: The ratio of noncompliant income to total revenue should be less than five per cent. Total revenue includes gross revenue plus any other income earned by the company. This amount is to be cleansed out as charity on a pro rata ratio of dividends issued by the company.

5. ILLIQUID ASSETS TO TOTAL ASSETS: The ratio of illiquid assets to total assets should be at least 20 per cent. Illiquid asset, here, is defined as any asset that Shariah permits to be traded at value other than the par.

6. NET LIQUID ASSETS TO SHARE PRICE: The market price per share should be greater than the net liquid assets per share calculated as (Total Assets - Illiquid Assets - Total Liabilities) divided by number of shares.

Though average daily trading volume declined after the introduction of capital gains tax, investors still recall the day KSE created a history of trading of more than one million shares in a day. The beauty of the existing settlement and paperless environment allowed the transfers immediately. In this regard, role of central depository company (CDC) and national clearing company of Pakistan (NCCPL) deserves all the appreciation. The KSE has played a key role in the formation and smooth operations of these two companies. For a long time, CDC office was housed in KSE building and NCCPL also has office here.

After the 2008 crisis, the KSE has been focusing on risk management for the protection of investors. However, a lot remains to be done for creating awareness among the investors, ensuring appropriate disclosures by the sponsors as well as the listed companies, release of periodical accounts, holding annual general meeting and above all distribution of dividend among the shareholders. Lately, efforts have also been made to ensure representation of minority shareholders on the board of directors of listed companies.


Total No. of Listed Companies 654 653 651 644 638
Total Listed Capital - Rs. 671,255.82 750,477.55 814,478.74 919,161.26 1,024,730.51
Total Market Capitalization - Rs. 4,329,909.79 1,858,698.90 2,705,879.83 3,268,948.59 3,071,919.21
KSE-100TM Index 14075.83 5865.01 9386.92 12022.46 11642.46
KSE-30TM Index 16717.10 5485.33 9849.92 11588.24 11133.90
KSE All Share Index 9956.76 4400.76 6665.55 8359.31 8074.51
New Companies Listed during the year 14 10 4 6 4
Listed Capital of New Companies - Rs. 57,239.92 15,312.12 8,755.73 33,438.45 16,010.82
New Debt Instruments Listed during the year 3 7 1 4 2
Listed Capital of New Debt Instruments - Rs. 6,500.00 26,500.00 3,000.00 5,650.18 5,000.00
Average Daily Turnover - Shares in million 268.23 146.55 179.88 132.64 103.70
Average value of daily turnover - Rs. 25,262.97 14,228.35 7,450.75 4,405.20 3,712.00