General term for the
organized trading of stocks through exchan ges and over-the-counter.
Stock market
The market in which shares are issued and traded
either through exchanges or over-the-counter markets. Also known as the equity market.
A cycle of ups and downs of prices of shares
or securities
Bulls and bears
The "bear" market is synonymous with a market that is
going down. A "bull" market means that the market is going up. It comes from the early days of the stock market when bull and bear fights were common.
Definition of 'Bull Market
A financial market of a group of securities in which
prices are rising or are expected to rise.
OTC and stock exchange
Non listed companies operate in OTC market listed
companies operate in stock exchange
Investment in pakistan
A fast grow of asset management companies
Institutional and individual investors
`Stock exchanges in Pakistan
Three stock exchanges in Pakistan
KSE LSE and ISE KSE is the oldest and dominant in size
Large size of KSE
Thousands of transactions daily
KSE
It is called price setter
It is called trend setter
Boom years crash and revivals in Pakistan
From the mid of 2005 to 2008 stock market of Pakistan
has been through a cycle of boom and bust but this situation was replaced at the end of 2008
Analysis of stock market growth
It consists of three periods
BOOM PERIOD 2002 to 2008
CRASH PERIOD
April 2008 to Jan 2009 RECOVERY PERIOD FEB 2009 TO end of the year
EFFECT OF NUCLEAR EXPLOSIONS
The index reached at its lowest level in 1999 in KSE
Effect of nine eleven on stock market
It effected the KSE in September 2001
KSE 100 reached back to 1400 level
Trading and turnover of shares and securities in Pakistan
Number of shares traded in a Pakistan in a particular
time period Mostly a week or month is called the turnover period
Turnover in the periods of boom and crash
Total turnover during FY03 was 53 billion at KSE
But 298 billion shares traded in FY02
Daily turnover in financial years
During FY03 215 billion shares traded in KSE
In FY02 120 million shares were traded In FY04 average and daily turnover began to fall
Daily turnover in Financial years
In FY08 turnover of KSE was 63 billion shares
Daily turnover was 256 millions In boom period 2007 average turnover was not high
It was 210 to 260 million
Growth f market in different financial years
The growth of market capitalization was higher then
the price of stock Because capitalization values are showing listed companies not those who comprise KSE 100 index
Growth during boom periods FY07
At KSE there was 37% annual growth in stocks
Capitalization growth was 39%
Growth during FY07 to FY09
Growth rate decline from 37% to 27%
Capitalization rate also declined
Market reversal
KSE 100 index crossed 6000 points in 2004
It was viewed that market has reached at its threshold
condition Market capitalization began to fall
Market reversal (cont)
After the end of 2004 market climbed up
Due to Entry of new banks
Entry on nonfinancial institutions in the stock
markets Investors confidents Widening investor base
Market reversal (cont)
In November 2005 KSE reached 900 level 300 above
2004
Macroeconomics fundamentals
Impact on stock markets
Sustain growth Modest level of inflation
Price stability
Interest rate Exchange rate stability These sufficient elements for financial market growth
Macroeconomics fundamentals(cont)
Effects of the boom periods
During the boom periods economy does not perform
well Macroeconomics fundamentals supports the financial market growth
Macroeconomics fundamentals(cont)
Economics fundamentals were strongly enough to
support the stock market till 2007 But these fundamentals were weakened till 2010
Macroeconomic fundamentals during FY03 TO FY06
Growth of banking were comfortable
Interest rate were fairly stable All industries were balanced
Manufacturing plants were facilitated
During FY07 TO FY08
Macroeconomic fundamentals could not sustain
shares price level There was a market collapse during this period
Global Market crash
In 2008 there was a global market crash
It was in US and European countries But it effected the whole world
Effect of global market on Pakistan market
This crises also effected the Pakistan stock market
This effect was at same time in 2008 There may be link between these two crises
Cont
But there seems no meaningful combination between
these two crises No financial linkage between Pakistans market and European market No operational linkage between two markets
Cont
This market collapse was in US and in leading
European countries Situation was little different between European countries and US This crises mostly effected the US market
Cont
This collapse seemed like a global collapse
Banks of US became insolvent The large investment banks also became insolvent
Cont
These crises were followed by recession
There was financial insolvencies and distress in
European countries Recession effected the Pakistans market also
Cont
Banking system and financial markets were effected by
the collapse
Policies to save financial market
All policies makers were in try to escape from further
All central banks were making policies to save from
theses collapses
Cont
They lowed bank rates from 2% to 3% to 0% to 1%
All money centers and banks of US and European
countries showed their price low
How these collapses captured the Pakistans stock market
In Pakistan only stock markets were effected
Banking system was not effected Because mortgage lending is negligible in Pakistan
Cont
Share prices began to fall in Pakistans stock market
Investors pulled out investment from market Investor became insolvent
Homegrown reasons for financial crises in Pakistan
There was no linkage between these two crises
Pakistans security situation was not well
Cont
Americans operations and suicides effected the stock
market Foreign investors began to withdraw investment from stock market
Foreign portfolio investment
Linkages with market collapses
Net foreign portfolio investment plays a vital role in
stock market of Pakistan In 2000 swift exit of FPI was a major factor in collapses of market
Net FPI in FYs
In FY03 FPI WAS 1.4 BILLION$
IN FY04 FPI was only 314 million$ It was 1.3% of total market capitalization
Cont
In FY05 it was 620 million$
In FY06 986 million$ In FY07 it was at peak 3283 million$
It was 5% of total market capitalization
