LAHORE STOCK EXCHANGE
S.KAMAL HAYDER KAZMI,
Research Analyst, PAGE
May 28 - June 3, 2012
The Lahore Stock Exchange (LSE) was incorporated as a company limited by guarantee under the Companies Act 1913 in 1970. It was decided that the exchange would commence its working by December 1970. LSE was the third exchange in the country after Karachi and Dacca. It initially had 83 members and was housed in a rented building in the crowded bank square area of Lahore.
The purpose of establishing the exchange was that the up-country investors with predominant middle class should have new avenues for investment and lay special emphasis on small and medium industries. The largest number of medium industries and business houses were located in Punjab. Therefore, a large number of entrepreneurs with small industries in Punjab wished to build their industries broad based by converting them into public limited companies. Large agricultural wealth was also available to the people of the Punjab who constituted 62 per cent of West Pakistan's population and that wealth had to be geared for investment.
Since then, the institution has served the cause of investing in small and large numbers, also providing the services and market place not only in Lahore but also beyond the city's boundaries.
LSE is the only domestic exchange to have more than one trading floors and is also the only exchange in the region to have established a unified order book with another domestic stock exchange in the country.
LSE has opened branches in the industrial cities of Faisalabad and Sialkot for trading. The Sialkot branch is referred to as the Sialkot trading floor.
Today, LSE is a fully electronic and completely automated stock exchange of Pakistan. Activities at LSE have increased significantly in all operational areas and a number of significant initiatives have been taken to improve the regulatory regime and the trading environment for the benefit of institutional investors as well as listed companies.
LSE has successfully met various challenges and has now emerged, fully geared and positioned to aggressively compete with its fellow exchanges, contributing towards the growth of capital markets in Pakistan.
LSE has held the corporate briefing program for the benefit of the investing public. This program also provides the opportunity for listed companies to expand the base of their retail investors and also help the investors to overcome misconceptions through direct interaction with the top management of listed companies.
Furthermore, LSE-25 company index calculates the performance of stocks assuming that all rights issues and bonus share issues only increase the listed capital so that the prices of the shares are not adjusted as they are in the case of the LSETRI (Lahore stock exchange total return index).
The exchange earned a surplus after tax of Rs103.6 million in FY2011 up by 210 per cent 33.4 million in FY 2010. The increase in surplus is attributable to both increase in total income and reduction in the total expenses. Resultantly, the exchange's total assets increased to Rs2.37 billion with reserves and surplus reaching Rs755 million outperforming FY10 and budgeted FY2011. More importantly, the performance has set up an excellent launching pad for the exchange to achieve its strategic goals outlined in the strategic business plan 2011-15.
The total size of the balance sheet FY11 increased by Rs34.60 million or 1.48 per cent last year and reached at Rs2,365.87 million from Rs2,334.26 million. Current assets increased due to increase of Rs71 million in receivables on account of additional listing fee from NIB bank and Fauji Cement Company. Non-Current liabilities shrank by Rs17.64 million or nine per cent due to transfer of rent to income and expenditure account during the period. Overall, current liabilities were also reduced by Rs51 million or six per cent.
FINANCIAL HIGHLIGHTS (RS IN '000)
INDICATORS 2010 2011 Profit on Bank Deposits and Investment 51,655 53,513 Admin Expense 132,658 129,757 Finance Cost 1,922 339 Donations 1,060 5,000 Other Charges 67,580 13,783 Income before Taxation 32,183 109,843 Net Income after Tax 33,386 103,587
The market started in the FY2010-11 with some positive note as LSE-25 index starting from 3092.70 points. The market and the index reached the lowest level of 2970.86 points of the period under review and closed at 3051.12 points at the close of the financial year. Local investors remained jittery while seeking clarity on the modalities of capital gains tax (CGT).
Investment in capital market during the period July-March 2010-11 by the foreign investors depicted a net inflow of $301.5 million. Corporate profitability increased in year 2011 but profitability concentrated in few large companies in the energy, telecom, and banking sectors. During the period under review, seven open-end funds were listed. Further, two companies, one TFC and one participation term certificate were in the pipeline of listings.
Two closed end funds were converted into open-end funds. Twelve securities were de-listed out of which three companies merged with other companies, seven companies went into winding up by court orders, one open end fund matured and fully redeemed and one company was de-listed after the buyback of the shares by the sponsors. Total companies listed at LSE were 496 as compared to 510 companies in the previous year. The total listed capital increased from Rs842.596 billion to Rs888.190 billion as at June 30, 2011. Similarly, the aggregate market capitalization increased from Rs2,622.928 billion to Rs3,166.044 billion during the same period. During the period under review, total share volume of regular market reduced to 1,124.762 million shares as compared to previous FY figure of 3,362.668 million shares.