Problems Facing Karachi Stock Exchange

Chapter # 1 Introduction & History

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Problems Facing Karachi Stock Exchange

Problems Facing Karachi Stock Exchange 1.1 Definition

The Karachi Stock Exchange or KSE is a stock exchange located in Karachi, Sindh, Pakistan. Founded in 1947, it is Pakistan's largest and oldest stock exchange, with many Pakistani as well as overseas listings. Its current premises are situated on Stock Exchange Road, in the heart of Karachi's Business District. It the oldest and largest stock exchange in Pakistan. It was established in 1947, and has historically been known for strong performance and high liquidity. However, the 2008 economic crisis and political instability in Pakistan caused the Karachi Stock Exchange to drop by more than a third between April and June 2008. See also: KSE 100 Index.

1.2 Introduction of Stock Exchange

The biggest Stock exchange of Pakistan located in Karachi is the Karachi Stock Exchange. Due to the liquidity offered by the Karachi Stock Exchange, it is known as stated as the Best Performing Stock Market of the World for the year 2002. Karachi Stock Exchange (KSE) is the biggest and most liquid exchange in Pakistan with the average daily turnover of 525.15 million shares and market capitalization of US $ 54.28 billion. The international magazine 'Business Week' announced the KSE as the best performing world stock market in 2002. Since then the KSE continuously maintains the reputation as one of the best performing markets in the world. Since 1991, foreign investors have an equal opportunity together with local investors to operate in the secondary capital market on the Karachi Stock Exchange. The establishment of the new policy for foreign investors and initiated privatization in Pakistan has accelerated the development of the KSE, which had even 663 companies

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Problems Facing Karachi Stock Exchange listed in 2006. In addition, companies have a choice to be listed on one of the two markets - the ready market and the over-the-counter (OTC) market, which has lesser listing requirements. While the ready market requires listing companies to have minimum paid up capital of Rs 200 million (about UK 1.8 m), the companies with minimum of Rs 100 million can be listed on the OTC market. The Karachi Stock Exchange trades the KSE-100 Index. It is a highly-diversified index of 100 largest capitalization companies' stocks from all sectors of Pakistan economy. A constantly revised index is a good indicator of the overall Exchange performance over a period of time. In 2005, 88% of the KSE total market capitalization was represented by the KSE-100 Index. The membership in the Karachi Stock Exchange is limited. Only 200 individual and corporate entities can register as members in the KSE. In 2005, 162 members traded actively on the Exchange. In addition, foreign corporate entities may also become the members of the KSE with the condition that the nominee member of the company is a citizen of Pakistan.

1.2.1 Nature of the Karachi Stock Exchange

Although initially the Karachi Stock Exchange was a physical exchange where trading took place by an open outcry system, now the Karachi Stock Exchange is fully automated. Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces (i.e. demand and supply for a particular stock).

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1.3 Karachi Stock Exchange History

Karachi Stock Exchange is the biggest and most liquid exchange in Pakistan. It was declared the Best Performing Stock Market of the World for the year 2002. As of Sept25, 2009, 654 companies were listed with a market capitalization of Rs. 2.806 trillion (US$ 33.81 billion) having listed capital of Rs. 705.873 billion (US$ 10.615 billion). The KSE 100TM Index closed at 9359 on Sept 29, 2009. The Karachi Stock Exchange, the oldest exchange in Pakistan, was established in 1947 and became a registered company limited a few years later. Since then it has experienced a remarkable progress with only 5 companies listed and 90 members on the Exchange in the 1950s and 663 listed companies and 200 members in 2006. In 2002, the Karachi Stock Exchange was recognized internationally by the magazine 'Business Week' as one of the best performing stock markets in the world. The Karachi Stock Exchange has started trading through the computerized trading system KATS (Karachi Automated Trading System) since 1997. As the demand for Trading Workstations installation has been significant during the consecutive years, today over 1000 KATS workstations are already installed. In 2005, trading in the Internet was also initiated. Since 1990, corporate entities can become members on the Karachi Stock Exchange. However, they have to meet stringent requirements of the Board of Directors and own a minimum capital of Rs. 20 million (approximately UK 181,000). At the beginning of 2006, 120 corporate members were registered in the Exchange. The Karachi Stock Exchange introduced KSE 50 Index at the end of the 20th century. However, because of the growth in the stock market, the Index did not represent the stock

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Problems Facing Karachi Stock Exchange market performance anymore. Thus, in 1991 a capital weighted KSE 100 Index launched. At the moment, the Exchange successfully trades two world-famous indices - KSE 100 Index and KSE All Share Index, which was introduced in 1995.

1.4 Purposes of the Study

The main purpose of study is to highlight the shortcomings present in following three aspects of KSE and provide the suggestions to accelerate the development process of it. Organizational structure of the Karachi Stock Exchange. Trading and Trading instruments of the Karachi Stock Exchange. Clearing and Settlement process of the Karachi Stock Exchange Secondary purpose of this research is to provide the basic information about the importance and functions of stock market, trading process and player which are involved in trading process and other information with reference to financial literacy.

1.5 Context of the Study

The context of this study is that KSE can improve there performance and reached to higher points in all over the world by improving Organizational structure of the Karachi Stock Exchange, Trading and Trading instruments of the Karachi Stock Exchange, Clearing and Settlement process of the Karachi Stock Exchange, trading process and player which are involved in trading process and other information with reference to financial literacy.

1.6 Significance of the Study

The study which I conducted is very beneficial for the business men and if we improve the performance of the Karachi stock exchange then it will be good for our country.

1.7 Problem Discussion

Since last two decades the Karachi Stock Exchange (KSE) is progressing very well and has made international recognition in stock trading business. This progress is the result of

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Problems Facing Karachi Stock Exchange reformation applied by the Security Commission of Pakistan, with help of the Government of Pakistan. But still in comparison with developed stock exchanges of the world, KSE is far behind in terms of infrastructure available for trading and technology using for trade. KSE needs to improve a lot to reach at the level of developed stock markets of the world.

1.8 Research Question

How the Karachi Stock Exchange (KSE) can be reached at the level of developed stock exchanges by improving the organizational structure, trading and trading instruments, and clearing and settlement process?

1.9 Main Problem:

Main problem is Karachi stock exchange is behind as compare to the other worlds foreign Stock Exchanges

1.9.1 Sub Problem 1:

Inflation

1.9.2 Sub Problem 2:

Economic crises

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1.10 Hypothesis
H1: Inflation is a reason for dropping the KSE thats why KSE is still behind as compare to stock exchange of world. Ho: Inflation is not a reason for dropping the KSE thats why KSE is still behind as compare to stock exchange of world. H2: Economic crises are the reason for dropping the KSE thats why KSE is still behind as compare to stock exchange of world. Ho: Economic crises are not the reason of Dropping the KSE thats why KSE is still behind as compare to stock exchange of world.

1.11 Assumptions
We are taking sample size of 25 people for this research which includes businessman, students, bankers and govt. officials and I conduct research in Faisalabad.

1.12 Delimitation of the Study

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Problems Facing Karachi Stock Exchange While making this project I faced numerous of problems are load shedding which always break the continuity and concentration while making project. Secondly this articles related to my topic were not easily available on internet.

1.13 Evolution of the Karachi Stock Exchange

By 2007, the number of listed companies reached 754 by the year 2007. The market capitalization at the same time was US $52 billion whereas the listed capital was US $8.27 billion. Following the estimates of the State bank Of Pakistan, we see that the foreign investments in the capital market are as large as US $ 523 million. The performance of the Karachi Stock Exchange has been wavering since the beginning of 2007. This could be because 2007 is an election year.

1.14 Karachi Stock Exchange Indices

The Karachi Stock Exchange uses the following index: 50 Shares Index: This index was used initially but as the market grew there was a need for a new index. KSE-100: The KSE-100 is a benchmark used to compare prices over a period of time. For the construction of the KSE-100 companies is with the highest market capitalization. To make the selection more representatives, the companies from all the sectors are chosen. The index was introduced in 1991 with 1000 as base points. By 2001 it has grown to 1770 points, in 2005 to 9989 points and reached a peak of 12285 by 2007. The KSE-100 is a capital weighted index comprised of 100 companies.

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KSE-30: This index was introduced at the end of 2006. it is comprised of 30 most
floating stocks. By 1997 the KSE-30 traded at 14199 points.

1.14.1 Arbitration
The disputes that arise between members and the investors in the Karachi Stock Exchange are resolved through the advices of the Arbitration Committee of the Exchange.

1.14.2 Settlement
The settlement in the Karachi Stock Exchange takes place through the centralized clearing house. The shares that are traded from the Karachi Stock Exchange on Monday and Tuesday of any week are settled the following Monday. The payments that are made to the members or the investors are channelized through the Clearing House. The shares of only those companies can be traded in the Karachi Stock Exchange which has offered the shares to the public either through the prospectus or an offer for sale. The trades in the Karachi Stock Exchange are settled through the weekly clearing.

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1.14.3 Karachi Stock Exchange Profile

Karachi Stock Exchange (Guarantee) Limited Address Telephone Web Site Trading Hours Holidays Stock Exchange Building, Stock Exchange Road Karachi - 74000, Pakistan UAN: 111-00-11-22, 2425502-3 Click here for the Karachi Stock Exchange web site Monday through Thursday: 9.30am - 3.15pm Friday: 9.15am - 12.00pm - first session 2.15pm - 5.00pm - second session Eid-ul-Azha, Kashmir Day (5 Feb), Ashura, Pakistan Day (23 Mar), Labor Day (1 May), Eid Milad-un-Nabi, Independence Day (14 Aug), Iqbal Day (9 Nov), JummahTul-Widah, Shab-e-Qadar, Eid-ul-Fitr, Christmas (25 Dec), Eid-ul-Azha - total 20 holiday days. Securities Shares, bonds, Modaraba Certificates of listed companies, Unit trust schemes, mutual funds certificates, futures, indices. Trading System Karachi Automated Trading System KATS Key Staff Mr. Zafar Ali Khan - Chairman

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Mr. M.A. Lodhi - Managing Director

1.15 Business Trading

The exchange has pre-market sessions from 09:15am to 09:30am and normal trading sessions from 09:30am to 03:30pm. It is the second oldest stock exchange in South Asia The Karachi stock exchange has undergone a considerable deal of downturn partly due to global financial crisis and partly on account of domestic troubles. It remained suspended in excess of 4 months and resumed normal trading only on December 15, 2008. The KSE 100 Index and KSE 30 Index after hitting the low around mid January has now rebounded and recovered 20-25% till March 12 2009.

1.16 Growth
The KSE is the biggest and most liquid exchange in Pakistan and in 2002 it was declared as the Best Performing Stock Market of the World by Business Week. As of December 20, 2007, 671 companies were listed with the market capitalization of Rs. 4364.312 billion (US$ 73 Billion) having listed capital of Rs. 717.3 billion (US$ 12 billion). On December 26, 2007, the KSE 100 Index reached its highest value ever and closed at 14,814.85 points. Foreign buying interest had been very active on the KSE in 2006 and continued in 2007. According to estimates from the State Bank of Pakistan, foreign investment in capital markets total about US$523 Million. According to a research analyst in Pakistan, around 20pc of the total free float in KSE-30 Index is held by foreign participants.

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Problems Facing Karachi Stock Exchange KSE has seen some fluctuations since the start of 2008. One reason could be that it is the election year in Pakistan, and stocks are expected to remain dull. KSE has set an all time high of 15,000 points, before settling around the 14,000 mark. Karachi stock exchange Board of Directors has recently (2007) announced plans to construct a 40 story high rise KSE building, as a new direction for future investment. Disputes between investors and members of the Exchange are resolved through deliberations of the Arbitration Committee of the Exchange. KSE began with a 50 shares index. As the market grew a representative index was needed. On November 1, 91 the KSE-100 was introduced and remains to this day the most generally accepted measure of the Exchange. Karachi Stock Exchange 100 Index (KSE-100 Index) is a benchmark used to compare prices overtime, companies with the highest market capitalization are selected. To ensure full market representation, the company with the highest market capitalization from each sector is also included. In 1995 the need was felt for an all share index to reconfirm the KSE-100 and also to provide the basis of index trading in future. On August the 29th, 1995 the KSE all share index was constructed and introduced on September 18, 1995.

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1.17 SWOT Analysis Strength:

Investing in Bonds Holding large financial resources Largest stock exchange of Pakistan. Good competitive skills Expert employees Government support Efficient functioning Relations Competitive advantages Innovative

Weakness:
Backward technology as compare to other stock exchange of world Some time Operating problems High employee cost Dependent Losses Sub standard working conditions

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Problems Facing Karachi Stock Exchange Organizations flaws effect on it.

Opportunities:
Having mostly weak competitors Customer trust International scope Fast market growth

Threat:
Wrong Government polices Economic crisis Adverse demographic conditions Mismanagement Effect of globalization Free market economy Political instability Inflation

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Chapter # 2

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Literature Review

2.1 Literature Review 2.1.1 Introduction:

Since last two decades the Karachi Stock Exchange (KSE) is progressing very well and has made international recognition in stock trading business. This progress is the result of reformation applied by the Security Commission of Pakistan, with help of the Government of Pakistan. But still in comparison with developed stock exchanges of the world, KSE is far behind in terms of infrastructure available for trading and technology using for trade. KSE needs to improve a lot to reach at the level of developed stock markets of the world.

Pakistan's KSE loses strength on oil prices cut

The market started off the proceedings way into the red zone and never stepped into the green territory during the course of the day where at one stage it hit the intraday lowest level at 7, 446.12.

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Problems Facing Karachi Stock Exchange Experts view Wednesday's bearish run on the back of a Supreme Court verdict Tuesday that directed the government to abolish Carbon Tax on prices of petroleum products. Following the verdict, a notification by Oil and Gas Regulatory Authority (OGRA) stated that petroleum products have been cut in the tune of 11 Pakistani rupees per litre. The benchmark KSE 100-Index plunged by 73.26 points to end at 7, 746.11, KSE 30Index shed 92.24 points to close at 8,020.40 levels, whereas KSE All Share Index lost 47.58 points to finish at 5,329.91 levels here. As far as the top price gainer is concerned, Shezan International Limited came out as the top performer with 6.10 rupees surge in its price that closed at 128.10, followed by Bata Pakistan Limited that gained 5.00 to end at 610.00, whereas Packages Limited increased by 3.98 to finish at 158.19 rupees. On the flip side, Fazal Textile Limited was the top decliner of the day as it shed 17.37 to rest at 330.10 rupees, followed by Colgate Palmolive that declined by 9.00 to settle at 290.00, Attock Refinery Limited lost 7.02 to finish at 135.53 rupees. (Xinhua July 2009) Explanation: According to the writers view bearish run on the back of a Supreme Court verdict in one day that directed the government to abolish Carbon Tax on prices of petroleum products. Following the verdict, a notification by Oil and Gas Regulatory Authority (OGRA) stated that petroleum products have been cut in the tune of 11 Pakistani rupees per liter.

Pak stocks receives fresh foreign investments

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Karachi Stock Exchange (KSE) witnessed fresh buying worth $235 million by foreign investors during the first quarterly in the current fiscal year, Geo News reported Saturday. According to statistics issued by National Clearing and Settlement Company, scrips worth $123 million were... (Oct, 2009)

Mixed trend at KSE; Index sustains 7,700 level

KARACHI: The benchmark KSE-100 Index of Karachi Stock Exchange (KSE) witnessing fluctuation on Monday, closed 4 points down to 7,717. Todays trade began in the green zone but later selling in banking sector eroded the earlier gains. The trade volume was recorded... (Aug, 2009)

Bullish KSE closes at 7163 up 34 points

KARACHI: Karachi Stock Exchange (KSE) 100-index closed over 7100-point level, as the last trading session on the last day of week ended in positive zone. Today the market began in possible territory and the same trend lasted in both the session... (Jun, 2009)

KSE hits bearish low today

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KARACHI: Karachi Stock Exchange witnessed narrowed trading activities today, as the KSE benchmark index could not cross 7100-point level. The trading began in positive zone and on one occasion, the index was seen touching 7085 points level; but, the selling pressure... (Jun, 2009)

KSE-100 index down on tax worry; rupee firmer

The Karachi Stock Exchange ended nearly two percent lower on Wednesday as investors sold shares on worry about taxes being imposed on brokerage services when the government unveils its 2009/10 budget on June 13. The Karachi Stock Exchanges benchmark 100-share index... (Jun, 2009)

KSE takes up future trading, financing today

KARACHI - A meeting of the Board of Directors (BOD) of Karachi Stock Exchange will be held on Tuesday (today) to discuss a number of market issues including the topic of future trading and margin financing. According to market sources, forward counter will be made operational by the end of this month, while 10 products will be made available for future trading, mostly state-run stocks present on NIT and EOBI portfolio such as PTC, PSO, OGDC, KAPCO, NBP and SSGC. It is also learnt that the rate of margin will be fixed to 18 per cent and the management of

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Problems Facing Karachi Stock Exchange the Karachi Stock Exchange has given the proposals to the BOD. Moreover, it is also expected that matter of ready board leverage product will also be discussed as market participants were desperately looking for a solution to this serious problem. Benchmark 100-index has shown range-bound activity in the past few weeks and market have witnessed limited turnover ranging between 90 million shares to 200 million shares depending on the market sentiments. Investors at the market are nervous and they are keeping themselves away from heavy investment activities, said a stock broker adding, we are hopeful that the management of the stock exchange and the authority will soon find a proper solution to this limited trading motion of the market. (July, 2009) Explanation: In this article writer tell that a meeting of the Board of Directors (BOD) of Karachi Stock Exchange will be held on Tuesday (today) to discuss a number of market issues including the topic of future trading and margin financing. According to market sources, forward counter will be made operational by the end of this month, while 10 products will be made available for future trading, mostly state-run stocks present on NIT and EOBI portfolio such as PTC, PSO, OGDC, KAPCO, NBP and SSGC

Karachi Stock Market Future Predictions

Karachi Stock Exchange is showing good response since the beginning of this week. Some shares became most wanted and are not letting investors to buy. You can look at PAKRI, Bestway Cement, Netsole, JSCL etc. these are going really good and also hope to be good in future too especially PAKRI and JSCL. PAKRI is expected to be near 70 and JSCL near 50. AHSL, Netsol, Bestway Cement, DG Khan Cement.

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Problems Facing Karachi Stock Exchange Keeping in view current market situations, one of my best friends has written his analysis about future market capitalization. Its really interesting and is beneficial. Please find the text below: Friends, I am closely watching Karachi Stock Exchange and thoroughly reviewing ups and downs of indexes since last month. It is a matter of pleasure, joy and happiness to know that our market has revived and started to cross the psychological limits. For instance in last week market seemed to be bullish and has crossed targets, speculations and psychological limits. By increasing 308.24 points market index has reached up to 7471.28 points. And investment has increased up to 84 Billion rupees. It is truly a great news and achievement especially in this time of recession and economical crisis. Few days back we have heard some regretful news about losing confidence of investors, local investors were transferring their investments to foreign countries e.g. Dubai, UK etc. some big companies have did a massive layoff, some companies were getting close and were trying to windup their Pakistan operations, our market was continuously loosing points, etc. Some reasons for this instability, volatility and insecurity of market were: International Economic Crisis Banks were getting bankrupt and were failed to collect revenue, installments on loans and investments Political turmoil in Pakistan Suspension of Chief Justice Swat Operation (recently), Lal Masjid Operation, Religious controversies, Terrorists activities, etc. Load shedding and Water supply problems

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Problems Facing Karachi Stock Exchange Inflation, increase in Petrol, Diesel, Electricity, and prices of other common goods and implementation of some unfair taxes Traders and other social society members are doing strikes, and they have planned to continue in future These are just a few common problems which I think were the major causes of a rapid flux in market, which may have caused to shoot your blood pressure, increased your heart beats or may have broken your hearts and ultimately some of you have totally lost your confidence in market. But now I think there is no more need to get depressed, because our market has again getting revived. According to my point of view, the most common reasons for the market revival are: Chief justice issue has been resolved Swat operation is near to finish and after that peace is expected in our country Foreign Investors have showed their interest in our Banking, Oil & Gas companies and in Cement sector also CBR has collected more than 1150 billion rupees in form of taxes Pakistan Government has received a huge amount of money for the help of Swat refugees from US and others Next installment of loan is expected in near future from IMF, Asian Development Bank etc. when this money will float, it will definitely causes some positive impact in our economy National Saving Schemes have decreased their interest rates, profit margins have also decreased in Real states etc. so investors are planning to transfer the

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Problems Facing Karachi Stock Exchange investments in stock exchange Some good reports of earning, profit and revenue of KSE listed companies are expected In upcoming weeks And because of these factors, Investors especially small investors have gain confidence and showed their interests in different sectors e.g. Banking, Oil & Gas, Cement, Investment & Securities etc. By considering these factors, and according to experts, there is a lot of potential exists in our market. And it is right time of buying. Some recommended sectors and the leading companies are as follows: Investment Finance & Securities Jahangir Sidiqui Companies Arif Habib Securities Banking Sector National Bank of Pakistan Muslim Commercial Bank

Oil & Gas Sector OGDCL Pakistan Oil Fields Pak Petroleum Cement Sector
DG Cement

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Lucky Cement Bestway Cement

Net sol Last Weeks Top Companies DG Cement PTCl Explanation : I am closely watching this article author focus Karachi Stock Exchange and thoroughly reviewing ups and downs of indexes since last month. And tell some common problems which he thinks were the major causes of a rapid flux in market, which may have caused to shoot your blood pressure, increased your heart beats or may have broken your hearts and ultimately some of you have totally lost your confidence in market. By considering these factors, and according to experts, there is a lot of potential exists in our market. And it is right time of buying. (SADIQ RIZVI , July, 2009)

Karachi Stock Exchange (KSE) Pakistan, Stocks, Shares, Securities, News, Weekly Analysis Karachi Stock Exchange (KSE) is succeeded to retain psychological level of 10,000 points. KSE 100 index had closed at 10,000.93 points by the decrement of 25.06 points or 0.25 percent. While KSE 30 index had closed at 10,313.27 points by the decrement of 134.91 points or 1.29 percent.

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Problems Facing Karachi Stock Exchange Following news have played a vital role in progress of Karachi Stock Exchange (KSE):

Foreign Portfolio Investors have invested a huge volume ($25 Million) during the week Foreign investments were mainly on Cement (e.g. Lucky cement, DG Cement), Fertilizer (Fauji fertilizer), etc. Urea prices have increased up to Rs. 30 per bag Dr. Hafeez Sheikh has been appointed as Financial Advisor of PM POLs discovery at Beta-I of 54bpd and 2.13 The fifth tranche ($1.2 Billion) of IMF is releasing shortly (31 March)

Local investors are very careful and cautious, and have opted profit selling, because of following factors:

Offshore well Shark-I of Pak Petroleum, has declared dry Terrorist activities throughout the country Rising Circular debt in energy sector Lack of electricity, water and gas are adversely and continuously affecting countrys economy and various industries e.g. Textile, Agriculture etc. And there are rumors that government is planning to increase electricity tariff further

In next monetary policy a very limited cut in discount rate is expected

NML, Lucky Cement, Lotte Pakistan, Lafarge Pakistan, OGDC, NBP, Bank Al Falah, DGKC, PTC, TRG, SNGP, and SSGC were on top last week. NOTE: The information posted in this blog (forum) is based on current affairs & investors point of view. There may be discrepancy in the ground realities. (Rana Khurram. March, 2010) Explanation:

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Problems Facing Karachi Stock Exchange In this article the author tells that Karachi Stock Exchange (KSE) is succeeded to retain psychological level of points and some news have played a vital role in progress of Karachi Stock Exchange (KSE) like Foreign Portfolio Investors have invested a huge volume during the week and Urea prices have increased etc And then Local investors are very careful and cautious, and have opted profit selling which are NML, Lucky Cement, Lotte Pakistan, Lafarge Pakistan, OGDC, NBP, Bank Al Falah, DGKC, PTC, TRG, SNGP, and SSGC were on top last week.

2.2 Literature Review Conclusion

I am closely watching Karachi Stock Exchange and thoroughly reviewing ups and downs of indexes. main reasons for this instability, volatility and insecurity of market were: International Economic Crisis, Banks were getting bankrupt and were failed to collect revenue installments on loans and investments. Political turmoil in Pakistan, Suspension of Chief Justice, Swat Operation (recently), Lal Masjid Operation, Religious controversies, Terrorists activities, etc, Load shedding and Water supply problems.

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Problems Facing Karachi Stock Exchange Inflation, increase in Petrol, Diesel, Electricity, and prices of other common goods and implementation of some unfair taxes, Traders and other social society members are doing strikes, and they have planned to continue in future.

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Chapter # 3 Research Methodology

3.1 Research Methodology

Quantitative Research approach is employed for this study. This is a comparative study in which the Karachi Stock Exchange (KSE) is compared with two the worlds leading stock markets, the London Stock Exchange (LSE) and the OMX Nordic Exchange Stockholm (OMXS) and only secondary data is used for this comparison.

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3.2 Research Design

I selected a topic for conducting the research on Problems facing Karachi stock exchange. I used the methodological approach of interviews from different Businessmen, Students and teachers, for it first I develop a questionnaire and I will apply the different tools and techniques to find out the accurate results. 3.3 Accumulations and Sample I took sample size of 30 people for this research about Karachi stock exchange which includes businessman, students, bankers and I conduct research in Faisalabad.

3.4 Population sample

Population 1- Students 2- Job person 3- Businessman Sample size 14 6 10

3.5 Samples and Sample Method

In this research, I took the sample size of 30 people and I have chosen almost all categories people which are related to Karachi Stock Exchange directly or indirectly.

3.6 Research Instruments

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Problems Facing Karachi Stock Exchange I prepared 5 close ended questions and 9 questions are four intervals and there are few three intervals questions in this researchs questionnaire.

3.7 Procedures and Data Collection

In this research project mostly all the data is primary data which I will conduct research myself like I will personally go to the students, job person, businessman and I gathered the information through questionnaire and secondary data is also used in literature review.

3.8 Data analysis and Interpretation

I applied the SPSS (statistical packages social science) Software to obtain the results of the samples that I obtained. By applying this software I obtained the accurate results. I also use the Chi-Square, frequency graphs, tables, percentage and other statically tools.

3.9 Treatment of Data

The data was organized in the form of table which was presented in the %age form and analyzed statically. The data was analyzed by SPSS (statistical packages social science) and Chi- square method.

3.10 Percentage
The Percentage was calculated by the following formula:

Where f = frequency

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Problems Facing Karachi Stock Exchange n = total number of population

3.11 Chi- Square

Chi square test was applied to examine the association between independent and dependent variable. The formula is

3.12 Degree of Freedom

Degree of Freedom = (r-1) (c-1) Where r and c represents rows and columns respectively. If the calculated value of chi-square of value column is greater Than the tabulated value of significant Colum then we accept the H1 and reject the H0.

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Chapter# 4
FREQUENCY, TABLES, GRAPHS & HYPOTHSIS TESTING

4.1 FREQUENCY TABLES AND GRAPHS

Q: 1 what is your Occupation? Occupation

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Valid

Student Job person businessman Total

Frequency 14 6 10 30

Percent 46.7 20.0 33.3 100.0

Valid Percent 46.7 20.0 33.3 100.0

Cumulative Percent 46.7 66.7 100.0

Occupation
Students Job person Business

Explanation I choose the people as sample for filling the questionnaire. I took the sample 16 Students, 6 and 10 are Teacher Businessman. Q: 2 What is your qualification? Qualification

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Frequency Valid primary/secondary education intermediate graduate post graduate Total 3 12 5 10 30

Percent 10.0 40.0 16.7 33.3 100.0

Valid Percent 10.0 40.0 16.7 33.3 100.0

Cumulative Percent 10.0 50.0 66.7 100.0

Qualification
Primary/secondary Education Intermediate Graduate Post graduate

Explanation Most of the peoples qualification is graduate and post graduate from which I collect the data and filled questionnaire of this research. Q: 3 Are you satisfied with KSE performance? Satisfied

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Valid

yes no Total

Frequency 22 8 30

Percent 73.3 26.7 100.0

Valid Percent 73.3 26.7 100.0

Cumulative Percent 73.3 100.0

Satisfied
Yes No

Explanation More then 70% people are satisfied with the performance but 30% people say that it is far behind as compare to the other stock exchange of the world.

Q: 4 According to you, can Karachi Stock Exchange be the biggest and most liquid exchange of world?

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Liquid

Valid

yes no Total

Frequency 23 7 30

Percent 76.7 23.3 100.0

Valid Percent 76.7 23.3 100.0

Cumulative Percent 76.7 100.0

Liquid

Yes No

Explanation More then 70% people said that Karachi Stock Exchange is the biggest and most liquid exchange of world.

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Problems Facing Karachi Stock Exchange Q: 5 What is your suggestion if a person want to invest in any sector, should he concern the KSE? Invest
Frequency 26 4 30 Percent 86.7 13.3 100.0 Valid Percent 86.7 13.3 100.0 Cumulative Percent 86.7 100.0

Valid

yes no Total

Invest
Yes No

Explanation

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Problems Facing Karachi Stock Exchange Approximately 85% people agree that they should he concern the KSE before invest in any sector, Q: 6 Are you being guided by some one regarding KSE?
Guided Cumulative Percent 26.7 100.0

Valid

yes no Total

Frequency 8 22 30

Percent 26.7 73.3 100.0

Valid Percent 26.7 73.3 100.0

Guided
Yes No

Explanation

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Most of the people are not being guided by some one regarding Karachi Stock Exchange and some of them had not enough information about KSE problems. Q: 7 Is Organizational structure of the Karachi Stock Exchange effect its performance? Performance
Frequency 15 5 5 5 30 Percent 50.0 16.7 16.7 16.7 100.0 Valid Percent 50.0 16.7 16.7 16.7 100.0 Cumulative Percent 50.0 66.7 83.3 100.0

Valid

yes no largely effected yes but not too much Total

Performance
Yes No Largely effected Yes but not too much

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Problems Facing Karachi Stock Exchange Explanation Organizational structure of the Karachi Stock Exchange strongly effects on its performance and it should be better. Q: 8 Can KSE improve their performance and reached to higher points in all over the world by gaining information with reference to financial literacy?
Reached Cumulative Percent 46.7 66.7 100.0

Valid

Yes not too much yes a lot of need too gain Total

Frequency 14 6 10 30

Percent 46.7 20.0 33.3 100.0

Valid Percent 46.7 20.0 33.3 100.0

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Problems Facing Karachi Stock Exchange

Reached
Yes Not too much Yes a lot of need too gain

Explanation Most of the people believes that if KSE cant improve their performance and reached to higher points in all over the world by gaining information with reference to financial literacy. Q: 9 Can the Wrong Government policies Effect KSE performance? Policies
Frequency 12 12 6 30 Percent 40.0 40.0 20.0 100.0 Valid Percent 40.0 40.0 20.0 100.0 Cumulative Percent 40.0 80.0 100.0

Valid

yes largly effect yes but not too much Total

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Problems Facing Karachi Stock Exchange

Policies

Yes Largely effect Yes but not too much

Explanation More then 40% people believes Wrong Government policies largely Effect KSE performance and 40% believes that it is effected and 20% people believe if is not effected on its performance. Q: 10 Can trade and trading instruments of the Karachi Stock Exchange effect on its performance? Trading
Frequency 12 3 10 Percent 40.0 10.0 33.3 Valid Percent 40.0 10.0 33.3 Cumulative Percent 40.0 50.0 83.3

Valid

Yes No largely effect

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yes but not too much Total

5 30

16.7 100.0

16.7 100.0

100.0

Trading
Yes No Largely effect Yes but not too much

Explanation Trade and trading instruments of the Karachi Stock Exchange also effect on its performance because more then 80% said it is largely effected. Q: 11 Can Karachi Stock Exchange (KSE) be reached at the level of developed stock exchanges by improving the organizational structure and clearing settlement process? Structure
Frequency 26 Percent 86.7 Valid Percent 86.7 Cumulative Percent 86.7

Valid

yes

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Problems Facing Karachi Stock Exchange

no Total 4 30 13.3 100.0 13.3 100.0 100.0

Structure
Yes No

Explanation Most of people believe Karachi Stock Exchange (KSE) be reached at the level of developed stock exchanges by improving the organizational structure and clearing settlement process. Q: 12 Can inflation rate effect the KSE performance? Inflation
Frequency 26 4 30 Percent 86.7 13.3 100.0 Valid Percent 86.7 13.3 100.0 Cumulative Percent 86.7 100.0

Valid

yes no Total

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Problems Facing Karachi Stock Exchange

Inflation
Yes No

Explanation Yes Inflation rate strongly effect the KSE performance and it is the sub problem of this research and hypotheses is also based on it.

Q: 13 Can KSE performance effected by politically instability in Pakistan? Instability

Frequency 7 19 Percent 23.3 63.3 Valid Percent 23.3 63.3 Cumulative Percent 23.3 86.7

Valid

yes largely effect

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Problems Facing Karachi Stock Exchange

yes but not too much Total

4 30

13.3 100.0

13.3 100.0

100.0

Instability
Yes Largely effect Yes but not too much

Explanation KSE performance is too much affected by politically instability in Pakistan more then 65% people said according to the questionnaire.

Q: 14 Can we say that as comparison with developed stock exchanges of the world, KSE is far behind in terms of infrastructure available for trading and technology using for trade? Technology

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Problems Facing Karachi Stock Exchange

Valid

yes no Total

Frequency 18 12 30

Percent 60.0 40.0 100.0

Valid Percent 60.0 40.0 100.0

Cumulative Percent 60.0 100.0

Technology
Yes No

Explanation As comparison with developed stock exchanges of the world, yes KSE is far behind in terms of infrastructure available for trading and technology using for trade. Q: 15 what do you think KSE need a lot effort to reach at the level of developed stock markets of the world? Effort

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Problems Facing Karachi Stock Exchange

Valid

yes not too much yes a lot of need Total

Frequency 18 1 11 30

Percent 60.0 3.3 36.7 100.0

Valid Percent 60.0 3.3 36.7 100.0

Cumulative Percent 60.0 63.3 100.0

Effort
Yes Not too much Yes a lot of need

Explanation Most of people think KSE need a lot effort to reach at the level of developed stock markets of the world. Q: 16 what do you think that economic crisis are the reason of Karachi stock exchange performance? Economic

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Problems Facing Karachi Stock Exchange

Valid

Yes No strongly effect not too much effected Total

Frequency 10 1 12 7 30

Percent 33.3 3.3 40.0 23.3 100.0

Valid Percent 33.3 3.3 40.0 23.3 100.0

Cumulative Percent 33.3 36.7 76.7 100.0

Economic
Yes No Strongly effect Not too much effected

Explanation People think that economic crisis is the big reason of Karachi stock exchange performance and it is also sub problem of this research. Age

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Problems Facing Karachi Stock Exchange

Valid

21.00 22.00 23.00 24.00 26.00 27.00 28.00 30.00 31.00 32.00 34.00 Total

Frequency 3 6 6 7 1 1 2 1 1 1 1 30

Percent 10.0 20.0 20.0 23.3 3.3 3.3 6.7 3.3 3.3 3.3 3.3 100.0

Valid Percent 10.0 20.0 20.0 23.3 3.3 3.3 6.7 3.3 3.3 3.3 3.3 100.0

Cumulative Percent 10.0 30.0 50.0 73.3 76.7 80.0 86.7 90.0 93.3 96.7 100.0

Age
21.00 22.00 23.00 24.00 26.00 27.00 28.00 30.00 31.00 32.00 34.00

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Gender
Frequency 24 6 30 Percent 80.0 20.0 100.0 Valid Percent 80.0 20.0 100.0 Cumulative Percent 80.0 100.0

Valid

male female Total

Gender
male female

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4.2 HYPOTHSIS TESTING

Case Processing Summary Cases Valid N occupation * inflation 30 Percent 100.0% N 0 Missing Percent .0% N 30 Total Percent 100.0%

Occupation * Inflation Cross Tabulation inflation yes occupation 1 2 3 Total Count Expected Count Count Expected Count Count Expected Count Count Expected Count 11 12.1 5 5.2 10 8.7 26 26.0 no 3 1.9 1 .8 0 1.3 4 4.0 Total yes 14 14.0 6 6.0 10 10.0 30 30.0

Chi-Square Tests Asymp. Sig. (2-sided) 2 2 1 .303 .165 .141

Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 2.390(a) 3.605 2.169 30

df

According to this table the amount of value column is grater then significance value so I accept the hypothesis. H1: Inflation is a reason for dropping the KSE thats why KSE is still behind as compare to stock exchange of world

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Chapter # 5 Findings, Conclusion & Recommendations

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5.1 Findings
Following are some findings which I got from people response, the major causes of a rapid flux in market, Major part of respondents said that KSE is far behind in terms of infrastructure available for trading and technology using for trade According to this research questionnaire the International Economic Crisis is too much effected on KSE performance. More then 60% People said that Political instability is increased in Pakistan. People think that Swat Operation (recently), Lal Masjid Operation, Religious controversies, Terrorists activities also decreases the index of KSE etc. People believed that Load shedding and Water supply problems also effect the KSE performance directly. Approximately 100 % people believed that Inflation, increase in Petrol, Diesel, Electricity, and prices of other common goods and implementation of some unfair taxes More then 50% People believed that organizational structure of country effect the KSE performance.

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5.2 Conclusion
Currently, demutualization and incorporation should be the first priority of the KSE authorities. Not only because this is the current trend of industry. Conversion into a public limited company will encourage KSE to maximize its profit and for this innovation and advancement will be applied in the present working style and that will attract both domestic and foreign investors. As demutualization and incorporation is taking time so KSE should start to stepping towards internationalization by developing business relation with other regional and international exchanges and by attracting regional and international companies for cross border listing on its indices. Remaining three suggestions: separate markets for different capital companies, improvement in derivative market and upgrading in trading, clearing and settlement process can be applied with the growth of KSE but these are also necessary to achieve the world class standard of stock market. Presently, KSE is progressing in right direction and above mentioned suggestions will help KSE to speedup the development process. But this is also true that supporting environment for financial industry is still missing in Pakistan. Because of the worst internal and external political and regional conditions, KSE is declared the world's most dangerous haven by Economist and this recognition is the biggest obstacle in the development of KSE.

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5.3 Recommendations
I have conducted the research on the root causes of the decreasing performance of KSE why KSE is still behind as compare to the other stock exchange of the world, so I find out some recommendation for the standards meet KSE. Government polices should not be restrict and that policies should be adopted which are not effected on the performance of the Karachi Stock Exchange. Economic crises should be minimized and that work should be done through which the economy can establish. Interest rate should be minimized in the country for KSE best performance. Government should be contributed and do the work for the betterment of Karachi Stock exchange. Political instability should be minimizing which had the bad impact on KSE performance. Inflation should be minimized which influences the KSE performance. Pakistan Government should invite foreign companies for investment in their country which should have good impact on the performance of the KSE. Trade and trading instruments of the KSE should be good. There is also the need to make better the organizational structure os Karachi Stock Exchange.

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Appendix
Research Questionnaires Dear Sir/Madam, I am the student of MBA at informatics (Ripah International University Islamabad). The following questionnaires are about my research project PROBLEM FACE BY KARACHI STOCK EXCHANGE AND ITS REASONS Kindly provide impartial opinion about each statement. I request you please provide me information to complete my research. I also undertake that all the information provided by you is solely for academic purpose only. The information obtained from you will be kept confidential I shall be very oblige to you. Yours truly, Bilal Ahmad. Questionnaire on Problems Facing KSE Personal Information. Name _______________________ Age _______________________ Date: ______________

Gender _______________________ Contact _______________________ Q: 1 what is your Occupation? Student ____ Job Person ____

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Problems Facing Karachi Stock Exchange Business ____ Nothing ____ Intermediate____ Post Graduate____ No ____

Q: 2 What is your qualification? Primary / secondary education ____ Graduate _____ Q: 3 Are you satisfied with KSE performance? Yes ____ exchange of world? Yes ____ concern the KSE? Yes ____ Yes ____ performance? Yes ____ Largely Effected ____ No ____ Yes but not to much____ No____ No ____ Q: 6 Are you being guided by some one regarding KSE? Q: 7 Is Organizational structure of the Karachi Stock Exchange effect its No ____ Q: 5 What is your suggestion if a person want to invest in any sector, should he Q: 4 According to you, can Karachi Stock Exchange be the biggest and most liquid

Q: 8 Can KSE improve their performance and reached to higher points in all over the world by gaining information with reference to financial literacy? Yes ____ Not too much ____ Yes ____ Largely effect ____ its performance? Yes ____ Largely effect ____ No ____ Yes but not to much ____ No ____ Yes, a lot of need to gain ____ No ____ Yes but not to much ____

Q: 9 Can the Wrong Government policies Effect KSE performance?

Q: 10 Can trade and trading instruments of the Karachi Stock Exchange effect on

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Problems Facing Karachi Stock Exchange Q: 11 Can Karachi Stock Exchange (KSE) be reached at the level of developed stock exchanges by improving the organizational structure and clearing settlement process? Yes ____ No ____ dont know____

Q: 12 Can inflation rate effect the KSE performance? Yes ____ Yes ____ Largely effect ____ No ____ No ____ Yes but not to much ____ Dont know____ Q: 13 Can KSE performance effected by politically instability in Pakistan?

Q: 14 Can we say that as comparison with developed stock exchanges of the world, KSE is far behind in terms of infrastructure available for trading and technology using for trade? Yes ____ stock markets of the world? Yes ____ Not too much ____ exchange performance? Yes ____ Largely effect ____ No ____ Yes but not to much ____ No ____ Yes, a lot of reach ____ No____ Q: 15 what do you think KSE need a lot effort to reach at the level of developed

Q: 16 what do you think that economic crisis are the reason of Karachi stock

THANK YOU FOR YOUR HELP.

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Contact list
Names
Ahmad Ali Ahsan Awan Ali Raza Aliza Amna Iqbal Aqsa Bilal Arif Asad Aslam Athar Awais Ayesha Malik Azam butt Danish Awan Faisal Ikram Fareed Attah Hamid Mehmood Hamza Aataf Hina Arshad M. Bilal M.Rehman Raees Ahmad Umer Raiz Usman Iqbal Waqas Javaid Wasim Yasir Latif

Occupation Businessman Job person Job person Student Student Student Businessman Student Businessman Businessman Student Student Businessman Businessman Job person Businessman Student Job person Student Student Student Student Businessman Student Job person Businessman Student

Contact numbers 03467747467 03219666649 03006627927 ---------------03007636034 03218665737 03457730072 03237693163 03217820507 03457939493 03008664682 03218598888 03006601926 03006519500 03226224524 03426939277 ----------03216660306 03216660092 03338393537 03007651768 03437433388 03018210239 03009656716

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Problems Facing Karachi Stock Exchange

Yousaf Zaib Zubair Sathie

Businessman Job person Student

03216687904 03236654255 03326537921

Reference
www.google.com www.maama.com www.kse.com www.nation.com www.economywatch.com www.advfn.com http://business.globaltimes.cn/world www.karachistockexchange.org

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Bibliography

Rana Khurram. March, 2010 SADIQ RIZVI July, 2009 Jahangir Sidiqui July, 2009 Dr. Hafeez Sheikh, 2007 Xinhua July 2009

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