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ANALYSIS OF PAKISTAN

STOCK EXCHANGE
METHODOLOGY
Source of information

PSX website
Financial Statements of PSX
Websites: Investopedia, Bloomberg, The Economist,
The Dawn News, The Express Tribune
Secondary Data
Reports
Research Articles
Television News
Effect of creating Pakistan
Stock Exchange
Founded on 18 September 1947 under the name of KSE.
According to Bloomberg, the Pakistani benchmark stock market
index is the third-best performer in the world since 2009 till 2014.
The Pakistan Stock Exchange (PSX) came into inception in
January 2016.
Pakistan Stock Exchange is listed as world best stock market in
terms of performance in year 2009 and 2015
It delivers 26% average return per year.
561 companies registered.
Foreign Investors: 1886, Domestic investors: 883, and Retail
investors: 22000.
Market Capital is US$ 98 billion.
Effect of creating Pakistan Stock Exchange
Demutualization Act" 2012 was formulated by the Government
of Pakistan.
Liquidity
The idea was discussed from last 15 years.
Replication of same structure.
Investor need quick liquidity, quick trade, and quick execution.
Foreign investor doesnt have to look at different stock
exchanges.
Low-cost from merging. (annual listing fee, regulatory
requirements.)
Investor base.
Economy should be represented by stock exchange.
Taxation
By the end of year 2016 PSX have provides 46% return.
Pakistan economy grew by 4.7% in FY16 compared to last three-
year average growth of 3.9%.
PSX sold 40% strategic shares to a Chinese consortium for $85
million.
PERFORMANCE OF SECTORS
Outperformed Sectors
AUTOMOBILE
PHARMACEUTICALS
CEMENT
FERTILIZERS
Determinants of performance
Effect of interest rate:
Rising interest rates affect both consumers and firms

As a result there will be lower economic growth.


Capitalization to GDP
It is a ratio which is used to determine that a stock market is
over-valued or under-valued

It measures the % of GDP represented by stock market


capitalization
Trade to GDP ratio
An indicator of the relative importance of international trade in
the economy of a country.

It is the sum of exports and imports divided by the gross


domestic product.
Technology development in Stock Exchange Market
2013 2015& 2016

KITS
Kaizen Program Merged platform

BATS
Homegrown Risk meter
New Data
PUCARS
center
Internet trading & cloud
Derivative
computing
system

2014 2017
WHATS LACKING ?

Awareness
13.4 trillion
3.9 million
New York
Stock exchange
Nasdaq

Tokyo stock London stock


exchange
exchange
3.8 trillion 3.6 trillion
DISTRIBUTED
LEDGER
TECHNOLOGY
Inherent Flaws in Index Construction
Measure of representing the value of a group of stocks

Price-weighted Index
Capital-weighted Index
Equal-weighted Index
Inherent Flaws in Index construction
KSE-100 Index

1991
Benchmark to compare prices
Capital-weighted Index
Cont..
Concentrated towards few large stocks
Large companies
External factors effecting the index
Major Effects
Holiday effect

Average returns higher preceding the holidays

Globally: Ariel (1990);Kim & Park (1994);Boyle et al.


PSX: Zafar et al. (2012)
Cont..
January Effect
Higher stock prices in the month of January

Globally: Gultekin (1983); Tininc & West(1984)

PSX: Iqbal et al. (2013) Shahid and Mehmood (2015)

Small firm effect


THANK YOU
QUESTIONS?

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