The Securities and Exchange Commission of Pakistan (SECP) has said that the exceptional performance of the Pakistani stock market in 2014-15 was due to stable political environment, investment projects backed by China; stable exchange rate against the dollar; steady foreign interest in stocks and increased confidence shown by the multilateral donor agencies.
According to the annual report of the SECP for 2014-15 issued here Saturday, the year 2014-15 witnessed a significant and steady rise in the stock market indices with historic and unprecedented levels being reached. The KSE-100 index which began the year at 29,701.58 points and reached 34,826.51 points by close of trading on February 3, 2015, ie, an increase of almost 17 percent since the inception of the year. The KSE-100 closed at 34,398.86 points on June 30, 2015 registering the growth of 16 percent from the start of period. Average daily turnover of 219.22 million shares was recorded by June 30, 2015. A total of 560 companies with total paid up capital of Rs 1,189.52 billion were listed on the Karachi Stock Exchange. As of June 20, 2015, market capitalisation stood at Rs 7,421.03 billion, reflecting a 5.5% increase over the last year. Foreign investment in the stock market exhibited net inflow of $38.54 million during the year, which reflects a decrease of 85% over last year.
Some of the more important developments that have contributed to this exceptional performance of the Pakistani stock market are: Stable political environment, investment projects backed by China; stable exchange rate against the dollar; improving security and law enforcement situation; steady foreign interest in stocks; increased confidence shown by the multilateral donor agencies such as the IMF, World Bank and Asian Development Bank's allocation for energy sector development; etc. However, the market took a steep dive to 28,927.04 on March 30, 2015 but later made several corrections during the remaining period of the financial year 2015. Major reasons for this being profit taking by the investors, the SECP said.
During the year the trading volume at the Pakistan Mercantile Exchange (PMEX) showed substantial growth as a total of 168 million commodity futures contracts were traded as compared to 4.2 million contracts during the same period last year. However, the traded value showed a decline to Rs 708 billion from the value of Rs 1,171 last year.
The current year witnessed a growth in the trading apparently due to the expansion of product basket that resulted in increased trading activity at the PMEX whereas the decline in value was apparently due to the decline in international commodity prices. Gold was the most traded commodity with crude oil, silver and cotton following the trend respectively. Overall, 165 million contracts in gold, 2.7 million in crude oil, 0.27 million in silver and 656 contracts in cotton were traded at PEMX during the period under review.
As per SECP, the future outlook of the capital markets revealed preparation of the capital market development plan in consultation with stakeholders, establishment of Centralized KYC Organisation and strengthening and stringent compliance with KYC regime and Customer Due Diligence (CDD) and benchmarking and compliance with international best practices.
Other future initiatives included revamping of existing Market Surveillance Suite (MSS) in line with international levels; promulgation of draft Futures Trading Bill; subsidiary Legal Framework under the Securities Act, 2015 and new Regime for Market Intermediaries on minimum entry standards, criteria for sponsors, directors and employees, corporate governance, risk-based capital adequacy and regular audits.
Other new initiatives included NCCPL to attain status of Central Counter Party; Finalisation of draft Research Analysts Regulations, 2015, Post-demutualization reforms to ensure divestment of exchanges' shares, take measures for facilitating corporatisation of individual PMEX members, activation of brokers and introduction of new futures contract at PMEX to complement trading activity at the Exchange, amendments to Companies (Asset Backed Securitization) Rules, 1999, credit Rating Companies Rules, 1995, regulations for electronic Initial Public Offerings (e-IPO), regulations for the issue of convertible and exchangeable debt securities and listing of short-term Shariah-compliant securities.
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