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1. INTRODUCTION
HISTORY/BACKGROUND
The stock market makes an appearance in the news every day. You
hear about it when it reaches a new high, in headlines like "The
Karachi Stock Exchange Average rose 50 index points today", when a
certain stock plummets, or when the political scenario changes.
Obviously, stocks and the stock market are important, but you may
find that you know very little about them. What is a stock? What is a
stock market? Why do we need a stock market? Where does the stock
come from to begin with, and why do people want to buy and sell it? If
you have questions like these, you've come to the right place.
The KSE is a supermarket for stocks. The KSE is like a big room where
everyone who wants to buy and sell shares can go to conduct their
transactions.
The Exchange makes buying and selling easy. You do not have to
actually travel to the Stock Exchange; rather, you can call a stock
broker who does business with the Exchange, and he or she will go
there on your behalf to buy or sell your stock. With an Exchange in
place, you can buy and sell shares instantly.
The Stock Exchange has an interesting side effect. Because all the
buying and selling is concentrated in one place, it allows the price of a
stock to be known every second of the day. Therefore, investors can
watch as a stock's price fluctuates based on news from the company,
media reports, economic news and a range of other factors. Smart
buyers and sellers take all of these factors into account before making
decisions.
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.
Out of all the three Exchanges, the Karachi Stock Exchange is the
premiere Stock Exchange of the country, with over 700 listed
companies. It was established soon after the creation of Pakistan.
This is one of the ways in which shares differ from deposit accounts.
The principal amount of money you put in a bank or any fixed income
savings scheme always stays the same e.g. if you start with
Rs.100,000 you will always have Rs.100,000 (other than any interest
earned).changes in value according to the performance of the
company. With good management, the value of your investment in
shares of a company can grow over time so that your shares are worth
more than you paid for them. This is capital growth
A rights issue gives the existing shareholders the right to subscribe for
new ordinary shares at an issue price lower than the prevailing market
price and at a ratio equivalent to their existing shareholding.
Companies carry out a rights issue when they want to raise additional
funds to finance their capital requirements.
Stocks and shares are the most volatile asset class in terms of price
movements and thus, the most risky. Hence, do not invest directly in
the stock market unless you can bear a fall in price without it having
any impact on your day-to-day living standard. Remember the saying:
“the greater the reward, the higher the risk”.
The aim of investing in stocks and shares is to buy at a low and sell at
a high, but knowing when, is the problem. Many investors attempt to
time the market: they try to figure out when the market is going up
and buy into it before it does, and then figure out when it is going to
crash and sell everything just before it does. Unfortunately such spot
on accuracy is usually impossible to achieve, so what you can do is try
to catch a portion of each big swing. You buy when the upswing has
begun, and sell as the downswing starts. But for this to work, you
must be able to control your greed, as you do not know exactly when
the top or bottom is reached.
The stock market can be said to be driven by two emotions: greed and
fear. People get caught up in the boom fever and pay silly prices for
unworthy shares - this is greed driving bull markets. In bear markets,
people get carried away with the ruling negativity and are overeager to
believe the worst rumors - this is fear dominating bear markets. You
must step away from the crowd and not let them take over your
rational reasoning and action.
Tracking stocks
To track how your stocks are doing, you have to look at stock listings.
Stock listings are published in most of the newspaper (e.g. Dawn). The
listings look confusing at first, since they look like a mixture of
numbers, but can be a very useful tool when tracking your stock's
progress. The listings are organized into many columns, including the
following information:
Volume: The volume is the amount of stocks that were traded the day
before.
High, Low and Close: These are the highest and lowest price of the
stock the day before, and the closing price for the day before. This is
an indicator of how much the price of the stock fluctuated throughout
the previous day.
Net change: This is the change of the price of the stock from the
previous day. This gives you an idea whether the price is dropping or
rising.
A person buys shares with the intention to make profits but without
blocking money. The purchase at the end of the settlement is carried
forward to the next settlement. Here is where the client / Badla
financiers steps in. The financier's block the money for taking delivery
of shares purchased by the speculators. He gives the money to the
exchange for shares bought. For this facility the speculator pays
interest to the financiers. This interest is known as Badla.
The financier gives money to his broker who in turn, hands over the
same to the Exchange. The shares are retained by the Exchange under
custody, on behalf of the broker's client. Since the shares and the
money lie with the Exchange, broker's risk is also eliminated.
Example: If "A" has purchased 1000 shares of MCB @ Rs. 50 per share
in Settlement 1, he has to take delivery from "B" who has sold the
same. "A" would like to carry forward his position to the next
settlement by letting "C" (Badla Financier) take delivery at the
prevailing interest rate.
2. OBJECTIVES
3. RESEARCH PROBLEM
On April 18, the benchmark KSE 100-Index reached the all time high,
at 15,676 points but prolong political uncertainty and fragile economic
situation coupled with deteriorating law and order situation in the
northern part of the country and the US threats of direct attacks in
tribal areas, have not only shattered the confidence of foreign
investors but also pulled out the local investors from the equity
markets of the country.
These major issues had pushed down the KSE-100 index from life high
at 15,676 points recorded on April 18 to 10.491 points, reflecting a big
decline of 5,185 or 33 per cent.
On the other hand, so far KSE 100-Index saw decline of 1,204 points
in three trading after the restoration of 5 per cent lower lock limit.
“At the time market is quite unpredictable but good news and support
of government by establishing proposed equity market fund can prop
up the stock market because local investors have already invested
their funds, so it’s now the government turn to inject investment at
the stock markets,” CEO of Dalal Securities M Siddique Dalal said.
Although share prices at attractive levels but the investors are still
concerned to further invest in the share markets due to the expected
increase in discount rates, fragile law and order situation and
burgeoning political confrontation.
At the moment stock markets are in the grip of confidence crisis and
only the government could restore the confidence of the markets, he
added.
“I don’t see formation of equity market fund soon, it takes few weeks
for launching the fund,” Siddique said
“All eyes are now on today’s meeting between SECP and stock
markets, it is being expected that mechanism of the equity market
fund will be finalized. If the Rs50bn support fund is launched, it may
act as a catalyst for the stock market,” Siddique said
4. VARIABLES
1. Capitalization
3. Political uncertainty
Political Uncertainty causes the stock market to go down even to
crash the market.
4. Foreign investors
5. Local investors
6. Equity markets
5. RESERCH METHODES
5.1TYPE OF STUDY: For this proposal the study done through the
researching form the local stock markets and the type of study
shows the relation between the variable and observed set of data
and expected data.
5.2 DATA COLLECTION: For this study the secondary data will
be collected through the research from magazines KSE annual
reports books, newspaper, and the help taken form the
CEMINAR library of SHAH ABDUL LATIF UNIVERSTITY
KHAIRPUR and he central library of SHAH ABDUL LATIF
UNIVERSITY.
www.dawn.com
www.geo.tv
4. The news channels are GEO NEWS, ARY ONE, AAJ TV and
SAMMA