Pakistan Stock Exchange (PSX) is
the national stock exchange of Pakistan. It was established with the name of
Karachi Stock Exchange (KSE) on September 18, 1947. It was incorporated on
March 10, 1949, under the name of Karachi Stock Exchange. (Guarantee) Limited
as a company limited by Guarantee. In October 1970, a second stock exchange was
established in Lahore by the name of Lahore Stock Exchange (LSE) to meet the
stock trading or investment and listing needs of the provincial metropolis of
Lahore and its surrounding region. In October 1989, a third stock exchange was
established in Islamabad by the name of Islamabad Stock Exchange (ISE) to cater
to the investors and companies of the northern parts of the country.
Originally, KSE was a small
bourse having only five listed companies with a total paid- up capital of Rs 37
Million. As the years passed and more companies got listed, the first index
constituting the companies on the bourse was formed. It was called the KSE 50
Index. Gradually, as the number of listed companies and trading activity
increased, the need for a truly representative index was felt and the KSE 100
Index was formed on November 1, 1991. Other indices such as the KSE 30 Index
and KMI 30 Index along with the recently added sectoral & ETF indices were
also added, thus bringing a total of 16 indices on the Stock Exchange at
present.
In the earlier days, trading of
shares used to take place through open outery on the trading floor. This was a
traditional way of communication between stockbrokers where verbal
communication and hand signals were used for conducting transactions. One
stockbroker would communicate that he was interested to buy a stock while
another stockbroker would communicate that he was interested in selling a
stock. Hence a buy sell deal was made across the trading pit. The open outcry
method was eventually replaced in 2002 by the electronic trading system. The
Karachi Automated Trading System (KATS) became operational at the Stock
Exchange which was a robust, high performance and high-capacity trading system.
This was later replaced by the New Trading & Surveillance System (NTS), a
cutting edge, future-ready, and robust trading system, which was successfully
implemented, installed and adopted in 2023.
The three stock exchanges,
Karachi, Lahore & Islamabad stock exchanges had separate management,
trading interfaces, indices and no mutualized structure. In March 2012, the
Stock Exchanges (Corporatization, Demutualization, and Integration) Act 2012
was passed by the Parliament of Pakistan and in the month of May of the same
year, it was signed by the President of Pakistan. By virtue of the said Act,
all three stock exchanges were converted into companies limited by shares and
it resulted into separation of ownership rights with the trading rights. The
brokers were termed as initial shareholders who were issued shares of
respective stock exchanges together with Trading Right Entitlement Certificates
(TRECs). The said Act also required all the stock exchanges to divest 40% of
their equity to strategic anchor investors and 20% to general public.
In order to implement the
condition of divestment of shares laid down in theabove-referred Act in letter
and spirit, it was essential to have only one stock exchange available for this
purpose to the potential investors. As such, the operations of all three stock
exchanges were ultimately integrated and a single entity with the name of
Pakistan Stock Exchange Limited (PSX) emerged on January 11, 2016. It was
followed by sale of 40% equity stake of PSX to Chinese consortium in the end of
2016 and offer of 20% equity stake to general public and self-listing of PSX in
June, 2017. As such, PSX is now a commercial entity as well as an active
frontline regulator of the capital market.
Many developments have taken
place at PSX over the last few years. These include upgradation of PSX
technology platform wherein a new Trading & Surveillance System has been
implemented at the Exchange as mentioned earlier. Furthermore, the Exchange has
brought forth new technological innovations and conventional developments such
as the Online Account which allows investors to open an account digitally, the
Sahulat Account which requires a simplified and convenient account opening
process, the PSX WhatsApp Service to make available a host of information to
users on their finger-tips, the My Portfolio virtual trading platform to enable
users to learn the ropes of investing through real time trading but with
virtual cash, the PSX Knowledge Center which is a repository of articles, blogs
and financial calculators related to the capital markets, and the PSX Glossary
which consists of a list of 500 terms and definitions to enhance and increase
knowledge on the financial markets. Over the past few years, nine Exchange
Traded Funds have also been launched at the Exchange. These ETFs belong to
different categories such as those of equity, debt and Islamic. Moreover, PSX
caters to those investors as well who are inclined towards Shariah compliant
investments. In this context, PSX lists 258 Shariah-compliant companies amongst
its listings.
The ecosystem of the Capital
Market of Pakistan comprises of different parts which together enable the
working of the Market as a whole. The companies at the forefront with PSX in
the ecosystem of the Capital Market of Pakistan are Central Depository Company
of Pakistan (CDC) and National Clearing Company of Pakistan Limited (NCCPL).
CDC handles the transfer of shares traded and keeps the custody of shares held
by investors electronically while NCCPL provides clearing and settlement
services of shares and funds against the transactions conducted at the
Exchange. The apex regulator is the Securities & Exchange Commission of
Pakistan (SECP) under whose regulations, PSX operates. The securities brokers,
capital market intermediaries, and the Asset Management Companies (AMCs) are an
essential part of the capital market ecosystem as well.
Pakistan Stock Exchange lists 523
companies on the Main Board and 3 companies on the GEM Board, representing 36
industrial sectors having total market cap of over Rs9,947 trillion. In recent
past, PSX outperformed the stock markets of the world and was called the
world's second-best stock market by Bloomberg in October 2023. PSX was also the
proud winner of Best Islamic Stock Exchange Award for three consecutive years,
2021, 2022, 2023, presented by Global Islamic Finance Awards (GIFA).
Pakistan Stock Exchange plays a
crucial role in the country's economy as it channels domestic savings and
foreign capital to the financial coffers of the country. By attracting interest
from local and foreign investors, much needed capital inflows are channeled in
the country through PSX. There are more than 318,000 investors investing on the
Exchange. Pakistan Stock Exchange provides for an attractive avenue of
investments with Price to Earning Ratio of 3.80 which is the lowest in the
region. This is a clear reflection of the attractive valuation of stock prices
prevalent at PSX. Not only that, Pakistan Stock Exchange has provided the highest
Dividend Yield of 9.38%as compared to other markets of the region.
Not only for investors, but also
for companies, PSX is an attractive capital market. By listing on the Stock
Exchange, companies can obtain much needed financing to fund their growth, invest
in new projects, and increase the country's exports. Companies listed on the
Exchange provide employment and benefits to thousands of Pakistanis and their
families and generate significant tax income for the Government of Pakistan.
On the occasion of completion of 75 Years of operations of Pakistan Stock Exchange, a Commemorative Postage Stamp of Rs. 30/- denomination is being issued by Pakistan Post on 30th August 2024.
