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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2008LAHORE STOCK EXCHANGEThe LSE is expeditiously working on itscorporatization and demutualization. Thecompletion of process of demutualizationhas been targeted by 31 December 2008.Mian Shakeel AslamActing Managing DirectorPakistan’s economy shows increasing signs ofstress and remained under pressure duringthe period under review. Envisagedmacroeconomic budgetary targets for financialyear 2007-08 were missed. The economy ispassing through a challenging period andfacing problems such as inflation, budgetdeficit, trade deficit, weakening rupee, rising oilprices, energy crisis and law and order issues.However, despite the deterioration, it is alsoimportant to note that as a result of structuralreforms and liberalization measures over thelast fifteen years, the economy hasfundamentally gained resilience.The positive development on political front isexpected to catalyze the investor confidenceand pave way for a better investment climatein the near future. This will also allow ourcapital market to offer better returns toinvestors based on their current price/earningsmultiple discounts when compared to otherregional market.The market remained unstable during theperiod under review. LSE-25 Index showed abullish trend in the first quarter and aftertouching the bottom at 4212.25 points on 2January 2008 started to gain momentum toreach the height of 4945.79 points on 26February 2008. In the second quarter of year2008 market remain volatile, it started todecline and touch the bottom of 3511.18points on June 23, 2008. In the third quarterthe market remain bearish to as index closedat 3292.99 points on 15 August 2008.As of 15 August 2008 the market capitalizationof the Lahore Stock Exchange (LSE) was US$38.722 billion. The average daily turnover ofshares remained 18.968 million shares with anaverage daily value of shares traded of US$29.478 million. The LSE listed 1 company, 6open-end mutual funds and 2 term financecertificates during the period under review.The LSE is expeditiously working on itscorporatization and demutualization. Thecompletion of process of demutualization hasbeen targeted by 31 December 2008.Demutualization will give the Exchange theroom to expand and to take up joint ventureswhich are probably not possible in mutualizedexchange. Integration of exchanges is alsobeing considered and is likely afterdemutualization.FUTURE OUTLOOKWith the advent of technology; approximately49% of the trading volume is being generatedthrough remote trading terminals. It is alsobecause of technology that the LSE was able toestablish trading floors in other cities as well.The LSE has trading floors in the cities ofFaisalabad and Sialkot and is now consideringopening trading floors in Multan and Peshawaras well.Introduction of index trading and derivativesproducts such as options and swaps and otherproducts will increase the products offered bythe exchange, giving investors more choicesand hence increasing trading activity of theexchange.CONTACT INFORMATIONIntegration of the exchanges is also beingconsidered and is likely after demutualization.Another concept that will help greatly inexpanding investor base is cross listings andGDRs. Work is underway in this regard.In 2008 Lahore Stock Exchange plans to:• continue with its strategy of increasing itsgeographical outreach through the use ofinformation technology in order to attract highertrading volumes;• phase-out of Carry-Over Trading and itsreplacement with Margin-Trading and othermodes of financing;• frame a strategy for the demutualization andintegration of the stock exchanges of Pakistanin the interest of the Exchange and capitalmarkets of the country;• enhance trading in the derivatives marketand introduce Stock and Sector Index Futures;• replace existing exposure monitoring systemwith Value at Risk Margin System in line withglobal practices;• Market BrokerNet - Broker hosted InternetStock Trading Solution;• promote and market the indigenouslydeveloped trading software i.e. Ultra Trade andrelated systems to other stock exchanges;• implement a regular timetable for the BrokerSystem Audit, in order to build investors’confidence; and• strengthen the surveillance function of theExchangeContact Name Mr. Amir RazakhanE-mail amir@lahorestock.comWebsite www.lahorestock.comPAGE 62
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2008LAHORE STOCK EXCHANGEOFFICIAL 6 MONTH STATISTICSUS$ millions# Shares millionsTotal Volume Average Daily Volume Total Volume Average Daily VolumeStocksJan-08 941.64 40.94 642.59 27.94Feb-08 888.79 46.78 515.45 27.13Mar-08 726.48 36.32 451.43 22.57Apr-08 849.66 38.62 488.78 22.22May-08 487.72 23.22 310.37 14.78Jun-08 339.15 16.15 254.92 12.14TOTAL 4,233.43 33.67 2,663.53 21.13BondsJan-08 0.00 0.00 0.00 0.00Feb-08 0.00 0.00 0.00 0.00Mar-08 0.00 0.00 0.00 0.00Apr-08 0.00 0.00 0.00 0.00May-08 0.00 0.00 0.00 0.00Jun-08 0.00 0.00 0.00 0.00TOTAL 0.00 0.00 0.00 0.00OtherJan-08 0.00 0.00 0.00 0.00Feb-08 0.00 0.00 0.00 0.00Mar-08 0.00 0.00 0.00 0.00Apr-08 0.00 0.00 0.00 0.00May-08 0.00 0.00 0.00 0.00Jun-08 0.00 0.00 0.00 0.00TOTAL 0.00 0.00 0.00 0.00Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08Market Capitalization (US$ millions) 64,172.31 69,042.02 65,886.48 63,313.56 50,430.20 51,377.63Index 4,457.31 4,841.66 4,695.82 4,648.50 3,826.86 3,868.79PRACTICES & PROCEDURESTradingDaysMonday-FridayHours Monday-Thursday, 09:45 - 14:15 ; Friday, 09:30 -12:00 & 14:30 - 16:00CFS release: Monday-Thursday, 13:30 -15:00 ;Friday, 13:30 - 16:30Open market CFS: Monday-Thursday, 15:30 - 16:30 ;Friday, 16:45 - 17:30Market segmentation 4 segmentsSystemAutomated trading, clearing & settlement, depositorylink, data dissemination, reporting facilities, internetservices, WANWANMechanismsContinuous auctionMarket-maker/Specialists NoInstrumentsOrdinary Shares, Preference Shares, ModarabaCertificates, Government Bonds/Securities, TermFinance Certificates (TFC)CurrencyPakistan RupeesReal time information Best bid/ask, last price, last volume, total volume,listed company announcementsClearing & SettlementCentral DepositoryPeriodRegisteredSettlementClearingDVPYesT+3, T+1 smf Giyitrd VpmytsvydYesBook entryNettingNo, 1 day or more difference between payment anddeliveryClearing InstitutionRisk SharingMargin/LendingCustodiansYes, wholly ownedYesYesIndividuals, institutional investors,brokerage houses, banks,exchange membersTaxesCash Dividends 10%Interest Income 10%Capital Gains Exempt until 2007Structure & RegulationsLegalRegulationSecurities marketregulationsTrading rulesSurveillanceCorporate actionsTrading halts regulationsInvestor protectionForeign ParticipationForeign investorsInvestment limitationsRepatriationCompany Limited by Guarantee,without share capitalSelfSecurities & Exchange Ordinance1969 and Rules framed there under,Companies Ordinance 1984ExchangeYes, electronicCentralizedNoYesAllowed, No restrictionsNo limitationsNo restrictionsPAGE 63
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