Stock Market In Pakistan Financial Institutions & Capital Markets

Abstract

Stock exchange is a place where securities are bought and sold. Such securities include shares, derivative and bonds. It also provides facilities for the issue of securities. Prices of shares and bonds are influenced by their demand and supply like in other commodities. In order to list a security on the stock exchange, there are certain requirements. Stock exchange serves both as a primary market for the initial public offerings (IPO) and as a secondary market for their subsequent buying and selling. Kenneth Chang said once, “A market is the combined behavior of thousands of people responding to information, misinformation and whim, so in other words we can say that behavior of the market shows the different trends in economy”. This means that stock market is significant in economy and it can provide opportunities as well as threats for economy. In Pakistan three stock exchanges are working. They are:  Islamabad Stock Exchange (ISE)  Lahore Stock Exchange (LSE)  Karachi Stock Exchange (KSE) Most active of these markets is KSE. KSE was established just two months after independence of Pakistan in 1947. Estimates show that 85% of turnover occurs at KSE, 14% at LSE and only 1% at ISE. A total of 660 companies are currently listed on KSE, 497 companies are listed on LSE and 236 companies are listed on ISE. (See Appendix: Table 1) 2 Pakistan’s stock market is smaller in size but is significantly more active than the markets of this size. In recent years the market has provided very high returns to investors. In 2002 the market was declared as the best performing stock market globally.