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NUST Business School

Course: Fundamentals of Financial Management


Topic: Pakistan Stock Exchange

Submitted to;
Sir Sohail Rizwan
Submitted by;
Kainaat Zulfiqar
BSAF 2K16A

Date: 27th September, 2017.


Introduction
A stock exchange is an organization which gives trading facilities for stock traders. Stock traders
can trade shares/other financial instruments of the listed companies. Pakistan Stock Exchange
(PSX) was established in 2016 after merging the three stock exchanges of Lahore, Karachi and
Islamabad. Originally it was established as Karachi Stock Exchange back in 1947, when Pakistan
came into existence, Lahore Stock Exchange was established in 1970 and Islamabad Stock
Exchange in 1992. As Pakistan Stock Exchange came into being in 2016, there were 560
companies listed with 1886 foreign investors, 883 domestic investors and about 0.22 million retail
investors. At present PSX is operating through internet based order routing system. Has a banking
sector, Market capitalization of US $ 72.3 billion. This merger aimed to help reduce splintered
market and create a strong case for attracting strategic partnerships necessary for providing
technological expertise and assistance.

Investors can rely on PSX and can buy and sell listed companies common stocks and other
securities from their efficient markets. PSX has set a standard according to the legal framework of
Pakistan. They have set rule for eligibility criteria, obligations, procedures etc for all the investors
and companies to follow, who are a part of the Pakistan Stock Exchange.PSX gives all the
necessary information on their website. They provide annual reports which are uploaded. The
following figure is just a graphical example of the top sectors of shares which was published in
May 2017.

Who is the Regulator?


The controller for the corporate part and securities market in Pakistan is the Securities and
Exchange Commission of Pakistan (SECP). This was established up on January 01. The
Commission controls the consistence of the corporate laws in the nation. The framework gives
operational, regulatory and monetary independence and in the meantime gives a responsibility
system through foundation of a Securities and Exchange Policy Board. All strategy choices are
made by the board. The Board is straightforwardly responsible to the Parliament.

Trading Rights Entitlement Certificate Holders of the stock trades are additionally subject to the
discipline of self-regulation Rule Book of the stock trades.

Trading exercises are being followed through the supervision to ensure that there are no illicit
postings and dealings made in any of the issues recorded in the Exchange.

Buying and selling of Shares?

One can purchase shares when an organization initially comes to market, or can get them through
the share trading system once they are being exchanged and are available for use. Organizations
which need to issue shares regularly promote in an every day daily paper. On the off chance that
a man chooses to purchase these offers, they can look for more data from the organization's site
or can top off the application frame at the subsidiary bank or approach the organization for a plan.
Most offer dealings happen in what is known as the secondary market. This is the place existing
investors offer and new financial specialists purchase.

Dealing is not allowed of the securities of the company in PSX if it isnt listed and no company
is listed if its minimum paid up capital is 200 million. PSX has released a new set of rules and
regulations to approve or reject applications of listing companies.

Market and its working:

We can evaluate market performance by the following indicators:

Market Capitalization
Value Turnover
Traded Volume
Composite Index

A number of factors influence the sentiment of the market which includes- economic, political,
fiscal, etc Interest rates, foreign exchange, growth rates, and inflation; are few other economic
indicators that affect the performance of the Stock Market. I n f l a t i o n rates, commending
growth, stabilized interest rates and foreign exchange are great news for the stock market.
These uplift the market performance. The investor might face a number of risks in their
investing activities such as market risks as there is constant market crash risk, Liquidity risk
arises when an investment cant be bought or sold quickly enough to prevent or minimize a loss
or an inflation risk etc

Tax:
Foreign investors are openly permitted to work in the capital market. There is no restriction for
holding shares for exchanging purposes and besides no limitations on remote. Assets contributed
are unreservedly transferable with the dividend. Foreign Investors are dealt with at standard with
local investors in tax treatment. Though the dividend of local investor is liable to withholding
charge at 12.5 %. Dividend income is taxed as a different piece of income in the hands of
individual investors.