General term for the

organized trading of stocks through exchan ges and over-the-counter.

Stock market The market in which shares are issued and traded

either through exchanges or over-the-counter markets. Also known as the equity market.

A cycle of ups and downs of prices of shares

or securities

Bulls and bears The "bear" market is synonymous with a market that is

going down. A "bull" market means that the market is going up. It comes from the early days of the stock market when bull and bear fights were common.

Definition of 'Bull Market A financial market of a group of securities in which

prices are rising or are expected to rise.

OTC and stock exchange Non listed companies operate in OTC market listed

companies operate in stock exchange

Investment in pakistan A fast grow of asset management companies Institutional and individual investors

`Stock exchanges in Pakistan Three stock exchanges in Pakistan KSE LSE and ISE KSE is the oldest and dominant in size

Large size of KSE Thousands of transactions daily

KSE It is called price setter It is called trend setter

Boom years crash and revivals in Pakistan From the mid of 2005 to 2008 stock market of Pakistan

has been through a cycle of boom and bust but this situation was replaced at the end of 2008

Analysis of stock market growth It consists of three periods BOOM PERIOD 2002 to 2008

CRASH PERIOD April 2008 to Jan 2009 RECOVERY PERIOD FEB 2009 TO end of the year

EFFECT OF NUCLEAR EXPLOSIONS The index reached at its lowest level in 1999 in KSE

Effect of nine eleven on stock market It effected the KSE in September 2001 KSE 100 reached back to 1400 level

Trading and turnover of shares and securities in Pakistan Number of shares traded in a Pakistan in a particular

time period Mostly a week or month is called the turnover period

Turnover in the periods of boom and crash Total turnover during FY03 was 53 billion at KSE But 298 billion shares traded in FY02

Daily turnover in financial years During FY03 215 billion shares traded in KSE In FY02 120 million shares were traded In FY04 average and daily turnover began to fall

Daily turnover in Financial years In FY08 turnover of KSE was 63 billion shares Daily turnover was 256 millions In boom period 2007 average turnover was not high

It was 210 to 260 million

Growth f market in different financial years The growth of market capitalization was higher then

the price of stock Because capitalization values are showing listed companies not those who comprise KSE 100 index

Growth during boom periods FY07 At KSE there was 37% annual growth in stocks Capitalization growth was 39%

Growth during FY07 to FY09 Growth rate decline from 37% to 27% Capitalization rate also declined

Market reversal KSE 100 index crossed 6000 points in 2004 It was viewed that market has reached at its threshold

condition Market capitalization began to fall

Market reversal (cont) After the end of 2004 market climbed up Due to Entry of new banks

Entry on nonfinancial institutions in the stock

markets Investors confidents Widening investor base

Market reversal (cont) In November 2005 KSE reached 900 level 300 above

2004

Macroeconomics fundamentals Impact on stock markets Sustain growth Modest level of inflation

Price stability Interest rate Exchange rate stability These sufficient elements for financial market growth

Macroeconomics fundamentals(cont) Effects of the boom periods During the boom periods economy does not perform

well Macroeconomics fundamentals supports the financial market growth

Macroeconomics fundamentals(cont) Economics fundamentals were strongly enough to

support the stock market till 2007 But these fundamentals were weakened till 2010

Macroeconomic fundamentals during FY03 TO FY06 Growth of banking were comfortable Interest rate were fairly stable All industries were balanced

Manufacturing plants were facilitated

During FY07 TO FY08 Macroeconomic fundamentals could not sustain

shares price level There was a market collapse during this period

Global Market crash In 2008 there was a global market crash It was in US and European countries But it effected the whole world

Effect of global market on Pakistan market This crises also effected the Pakistan stock market This effect was at same time in 2008 There may be link between these two crises

Cont But there seems no meaningful combination between

these two crises No financial linkage between Pakistans market and European market No operational linkage between two markets

Cont This market collapse was in US and in leading

European countries Situation was little different between European countries and US This crises mostly effected the US market

Cont This collapse seemed like a global collapse Banks of US became insolvent The large investment banks also became insolvent

Cont These crises were followed by recession There was financial insolvencies and distress in

European countries Recession effected the Pakistans market also

Cont Banking system and financial markets were effected by

the collapse

Policies to save financial market All policies makers were in try to escape from further All central banks were making policies to save from

theses collapses

Cont They lowed bank rates from 2% to 3% to 0% to 1% All money centers and banks of US and European

countries showed their price low

How these collapses captured the Pakistans stock market In Pakistan only stock markets were effected Banking system was not effected Because mortgage lending is negligible in Pakistan

Cont Share prices began to fall in Pakistans stock market Investors pulled out investment from market Investor became insolvent

Homegrown reasons for financial crises in Pakistan There was no linkage between these two crises Pakistans security situation was not well

Cont Americans operations and suicides effected the stock

market Foreign investors began to withdraw investment from stock market

Foreign portfolio investment Linkages with market collapses Net foreign portfolio investment plays a vital role in

stock market of Pakistan In 2000 swift exit of FPI was a major factor in collapses of market

Net FPI in FYs In FY03 FPI WAS 1.4 BILLION$ IN FY04 FPI was only 314 million$ It was 1.3% of total market capitalization

Cont In FY05 it was 620 million$ In FY06 986 million$ In FY07 it was at peak 3283 million$

It was 5% of total market capitalization