JUNE 2013 - FEAS

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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013KARACHI STOCK EXCHANGECAPITAL MARKET DEVELOPMENTAND ECONOMIC OUTLOOKThe macroeconomic landscape of the countrywas badly affected by devastating floodsin July 2010, which directly affected about20 million people, mostly by destruction ofproperty, livelihood and infrastructure; therebyinflicted significant damage to the fragileeconomy. ADB approved a US$ 650 millionloan to Pakistan which was used to rebuild thedamaged infrastructure. Shortage of power andgas, escalating utilities costs, high borrowingcost exacerbated the situation for Large ScaleManufacturing as well as Service sectors. Thefiscal position remained weak with poor revenuegeneration whilst expenditure escalated. RealGDP growth in the outgoing year was recordedat 2.4% as compared to 3.8% in the previousFiscal Year. Nevertheless, our economy hasshown strong capacity to overcome challengesoriginated from both internal and externaleconomic environment while struggling towardsachieving long term sustainable growth.PERFORMANCE OF THE MARKETThe market started in the FY 2010-11 withsome positive note as LSE-25 Index startingfrom 3092.70 points. The market and the Indexreached the lowest level of 2970.86 points ofthe period under review and closed at 3051.12points at the close of the financial year. Localinvestors remained jittery while seeking clarityon the modalities of Capital Gain Tax (CGT).Investment in capital market during the periodJuly-March 2010-11 by the foreign investorsdepicted a net inflow of US$ 301.5 million.Corporate profitability increased in year 2011but profitability concentrated in few largecompanies in the Energy, Telecom and Bankingsectors.During the period under review, seven Openend Funds were listed. Further, two companies,one TFC and one Participation Term Certificatewere in the pipeline of listings. Two Closed endFunds were converted into Open End Funds.Twelve securities were delisted out of whichthree companies merged with other companies,seven companies went into Winding Up byCourt Orders, one Open end Fund matured andfully redeemed and one Company was de-listedafter the buy-back the shares by the sponsors.Total companies listed at LSE were 496 ascompared to 510 companies in the previousyear. The total listed capital increased from Rs.842.596 billion (US$ 9.362 billion) to Rs. 888.190billion (US$ 9.868 billion) as on June 30, 2011.Similarly, the aggregate market capitalizationincreased from Rs. 2,622.928 billion (US$29.143 billion) to Rs. 3,166.044 billion (US$35.178 billion) as on June 30, 2011. Thevolumes of the Exchange shrunk considerablyi.e. by 66%. During the period under review,total share volume of regular market reducedto 1,124.762 million shares as compared toprevious FY figure of 3,362.668 million shares.Complementing the efforts of members andlisted companies in seeking to find betterlevels of optimum operational efficiency, LSEcontinued to identify areas of improvementas part of the Exchange’s present and futuredevelopment.Key Information ContactsGovernment of Pakistan www.pak.gov.pkMinistry of Finance www.finance.gov.pkPrivatization Commission www.privatisation.gov.pkState Bank of Pakistan www.sbp.org.pkSecurity and Exchange Commission of Pakistan www.secp.gov.pkCONTACT INFORMATIONContact Name Mr. Haroon Askari E-mail ha@kse.com.pk Website www.kse.com.pkPAGE 54
FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013KAZAKHSTAN STOCK EXCHANGEKadyrzhan DamitovPresidentKASE has completed several main projectsin 2012 on its way to improvement anddevelopment of infrastructure, as well asthe expansion of local market.2012 has been a successful year forKazakhstan Stock Exchange in terms offulfillment of scheduled projects. Withinthe implementation and enacting mainprojects in 2012 KASE collaborated with itsmembers, issuers, investors through differentactivities and continues working actively onestablishment of bilateral and multilateralrelations with foreign exchanges, internationalassociations and financial institutions.Regarding the local projects of 2012, KASEworked on the alignment with the requirementsof the new Law on Risk Minimization, whichdefined amendments to the existing legislationaimed at the major objectives such as theincrease transparency of the stock exchangeissuers and members activity, protection therights and interests of investors, improvementof securities market infrastructure. Duringthe working process KASE had to change itsorganizational structure and internal normativebase. The reform process turned out to be quitelabor-intensive and affected all the divisions ofKASE. One of the main projects in alignmentwith the requirements of the new law on riskminimization is a new monitoring system ofKASE members - their financial strength andsolvency are under continuous control. Thereis a big volume of open data necessary forinvestors seeking a partner on Kazakhstan’sfinancial market on KASE website.Following the announcement by theKazakhstani President in September 2011the Government of Kazakhstan approved theProgram aimed at partial privatization of theSovereign Welfare Fund’s “Samruk-Kazyna”subsidiary blue-chip companies on KASE toenable Kazakhstani citizens to buy shares.The first IPO within the program was launchedin November 2012 with KazTransOil (an oiltransportation and pipelines company) as thefirst company to go public.With the announcement of the program theamount of retail investors’ accounts increasedfive times and it keeps growing very rapidly.Over 34 thousand retail investors and 10accumulative pension funds of Kazakhstan tookpart in the subscription to shares organized byfinancial advisors and KASE. The combineddemand for those shares exceeded the supplymore than twice.Upon completion of the subscription toKazTransOil KASE successfully accomplishedits role as trade organizer in the first stageof the nationwide program “People’s IPO”.The secondary market trading of KazTransOilshares on KASE remains active. Since thesecondary market trading was launched onDecember 25, 2012 to the end of 2012 thetrading volume has exceeded US$19 m,which is a very significant trading volume forKazakhstani equities. As of the end of 2012 theprice of KazTransOil shares increased by morethan 14% followed by an insignificant decreaseof 2% in January and February of 2013.KASE’s primary role aside from participationin working groups on the IPO process isbook-running. For this reason, the exchangedeveloped a special module in the TradingSystem to collect applications from the marketparticipants, consolidate, process, generatereports and execute other functions relatedto performing the subscription. KASE alsoacknowledged that sudden significant increasein number of investors on the market andtrading activity may require additional capacityfor the existing trading system and introducedchanges to increase its capacity by 20-30%.Last year KASE worked on introduction ofnew derivative products launching futures onmost liquid shares. In addition, KASE receiveda license for clearing operations allowingit to clear deals on the exchange market.Elaboration of the Remote Access and DMAconcepts, as well as development of the T+3settlement cycle project realization scheme alsotook place in 2012.All the above-mentioned local projectsrequired development of the IT systemsincluding upgrade of the trading system andintroduction of new modules and programs.IS2IN - an electronic system for exchangeof electronic documents and provision ofinformation about issuer to the investor wasestablished, along with the new trading method“Subscription” introduced especially for thePeople’s IPO program. There were additionalIT-developments related to DMA and Remoteaccess introduction.Concerning the overall stock market indicators,following a drop of KASE index in 2012 byabout 12.3% due to adverse conjuncture in theface of continuing instability on global markets,as well as by some issues in Kazakhstani banksector and the harsh drop of one of the leadingcompanies share price, in the beginning of2013 KASE index has increased by 12-15%mainly due to increase in price of newly listedsecurities (KazTransOil and KCell) that becamea part of the index due to their high liquidity.KASE is one of the key players in the capitalmarket development process. Aside from thefact that the stock exchange plays an importantpolicy role in defining listing and compliancestandards for companies that wish to gopublic, the performance of a national stockexchange often taken as a proxy for the healthof a nation’s economy. Thus, improvement ofKASE performance and enhancement of itsself-regulatory functions is an important policygoal focused at strengthening key partnersand uniting efforts in favor of the capital marketdevelopment.We continue to collaborate with internationaland internal financial institutions to improveKASE infrastructure and participate in globaleconomic events to gradually gain worldwiderecognition. In 2012 KASE signed an agreementwith Wiener Boerse AG on joint calculation andpromotion of Kazakhstani securities marketindicators. One of the important projectsplanned for 2013 is full membership at theWorld Federation of Exchanges. KASE hasalready submitted the letter of intent, which wasreviewed by WFE Board of Directors, and ispreparing for successful implementation of theWFE accession procedure.PAGE 55
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