The extensive reforms introduced by the present government has helped in strengthening the system and bringing the stock market of Pakistan at par with the leading stock exchanges of the world as during the current fiscal year the KSE ranked Third in the world leading stock indices.
According to the ''Economic Survey'' released on Sunday in Islamabad, presenting annual data on the country''s economy, the booming stock market of Pakistan has been providing a breeding ground to the prospective investors for new and promising joint ventures. The buoyant mood in Pakistan''s stock markets, prevailing for the last two years, has broadened the investor base.
The KSE share index and aggregate market capitalisation (AMC) recorded increase of 41.1 percent and 48.3 percent, respectively, in FY05 and the KSE remained as one of the best performing markets around the world--during last two years.
Out of the 16 leading stock markets in the world, the KSE share index increased by 53.6 percent in terms of dollars during July-May 11, 2005-06, surpassed only by India and South Korea.
The KSE 100 has been one of the best performing emerging markets in the recent past. In the past four years, with compound annual growth rate (CAGR) of 56 percent, it has performed better than many emerging markets.
It is pertinent to mention here that all 16 leading stock markets of the world posted positive growth in the current fiscal year, ranging from 4.5 percent (New Zealand) to 67.5 percent (India). This indicates that the world''s economic recovery continued in the current fiscal year.
In the fiscal year 2004-05, 15 new companies were listed on the KSE. Their shares worth was Rs 26.06 billion. Some mega offerings of Pakistan Petroleum, Kot Addu Power and United Bank were made through the privatisation process.
Likewise, debt securities also witnessed 7 new listings, worth Rs 9.13 billion.
Despite the high volatility experienced at the end of the third quarter of fiscal year 2004-05, the market gained momentum and remained as one of the ''Best performing Stock markets'' among some of the top equity markets of the world in 2005. The stock market in Pakistan has emerged as an important source of new capital for industrial and commercial establishment.
Fiscal year 2005-06 continues to maintain its strong performance and so far has achieved new heights by creating many new records. The KSE-100 Index crossed the 12000 points mark for the first time in the history of capital market and touched an all-time high on April 13, 2006. The KSE-100 index made further inroads and touched 12274 points on April 17, 2006, showing a growth of 64.7 percent over June 2005.
Between December 2005 and April 2006 alone, the KSE shares index increased by 25 percent. Similarly, the total market capitalisation also increased to Rs 3419.4 billion on April 17, 2006 (US $57.0 billion) from Rs 2013.2 ($33.7 billion) showing a growth of 70 percent over June 2005.
At current levels, KSE''s market capitalisation is equivalent to about 44.3 percent of estimated GDP of FY06. The improved performance of the stock market can mainly be attributed to consistent and transparent economic policies resulting in strong economic growth; a successful privatisation process attracting foreign investors in prestigious organisation like PTCL and National Refinery; sound monetary policy of the SBP; maintenance of fiscal discipline and the capital market reforms including development measures introduced and adopted by the stock exchanges with full support and guidance of the apex regulator, SECP.
The government''s economic policies and capital market reforms helped in promoting a fair, efficient and transparent capital market, on the one hand, and resulted in attracting investment and restoring investors'' confidence in the capital market, on the other. The privatisation of the government entities through the bourses helped to broad-base the equity ownership to a significant level, indicative by as many as 1.4 million applications received for offering of Kot Addu Power Company.
The buying euphoria in the stock market was spurred by a number of other favourable factors including continuation of the present policies on banking sector by the SBP, renewed interest of a large number of buyers of shares, bright prospect of reaping dividends, good capital gains and presence of institutional investors in the market.
While OGDC, cement and the banking sectors led the rally at KSE, taking it to historically high at 12274 points on April 17, 2006, the banking and cement sectors were the most sought after stocks, and OGDC was the volume leader. The KSE saw robust activity, especially during the first 4 months of 2006, with all vital indicators pointing in the right direction.
The stock market is likely to maintain its bullish trend by the end of the current fiscal year.
During the period from July 2005 to March 2006 the listed capital on KSE increased from Rs 438.49 billion to Rs 486.49 billion, reflecting an increase of around 11 percent. The market capitalisation increased from Rs 2,071.18 billion to Rs 3,257.06 billion, reflecting an increase of over 57 percent in the value of shares. Similarly, the average daily turnover of shares increased from 430 million to 462 million shares. The KSE 100 Index increased from 7450.1 points in June 2005 to 11485.9 as on March 31, 2006, reflecting an increase of about 54.2 percent. The KSE 100 index surpassed all previous records and touched all-time high on April 17, 2006 and stood at 12277.8 points.
During the calendar year 2004, total profit before taxation of the 12 trading groups amounted to Rs 229.5 billion, which increased to Rs 326.3 billion in 2005, recording a growth of 42.2 percent. All trading groups and companies, except cotton and textile, showed unprecedented growth during the first nine months of the outgoing fiscal year.
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