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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005
LAHORE STOCK EXCHANGE
Hamid M. Imtiazi
Managing Director and CEO
Pakistan’s capital market showed
spectacular performance during the year
2004, as a result of favourable macroeconomic
environment along with the
support of regulatory reforms implemented
by the Securities and Exchange Commission
of Pakistan. The fundamentals of the
economy remained conducive for capital
formation. Low interest rates, excess liquidity
along with vigorous structural reforms gave a
boost to the investment activities.
During the year 2004, LSE-25 Index gained
501.86 points or 20.1% over December 31,
2003 to finish at 2997.61 points on
December 31, 2004. Market capitalization
increased to US$ 28.2 billion as on
December 31, 2004, showing a 72.8%
increase over December 31, 2003. In the
regular market, the average daily turnover of
shares was 80.0 million shares in the year
2004.
The government policy of privatization has
been very successful in attracting smaller
investors for broad-basing the share
ownership in the country. During the year,
the government off-loaded some of its
HISTORY AND DEVELOPMENT
The LSE was incorporated in Lahore, the
provincial capital of Punjab, Pakistan, under
the Securities and Exchange Ordinance in
1969, as a company limited by guarantee.
LSE caters to the needs of entrepreneurs for
raising capital and provides investment
opportunities to institutional investors and the
general public. The activities of the Exchange
have increased in all areas since inception.
LSE introduced screen-based electronic
trading in 1996 and became the first fully
automated Stock Exchange of Pakistan. LSE
has become a key institution in the financial
sector of Pakistan and has a membership of
152 brokerage houses. As of December 31,
2004, there were 527 listed companies,
having a listed capital of US$ 6.4 billion with a
market capitalization of approximately US$
28.2 billion.
LSE acts as a frontline regulator of the market
under the apex regulator, the Securities &
Exchange Commission of Pakistan. LSE has
made large investments in technology &
automation to keep pace with globalization of
securities trading. The Exchange is fully
committed to providing a transparent,
efficient, fair and investor friendly environment
for the benefit of investors and issuers. The
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Low interest rates, excess liquidity along
with vigorous structural reforms gave a
boost to the investment activities at the
LSE in 2004.
shares in major public sector organizations
like Oil & Gas Development Company Ltd.,
Pakistan Petroleum Ltd., Sui Southern Gas
Company Ltd. and Pakistan International
Airlines through the stock exchanges and
has further plans to off-load its shares in Kot
Addu Power Company, State Life Insurance
Corporation, United Bank Ltd. and Pakistan
Steel Mills in the near future.
As part of second generation capital market
reforms being pursued by the Securities &
Exchange Commission of Pakistan,
demutualization and the possibility of
integration of the three stock exchanges of
Pakistan is being seriously considered by the
members of the exchanges and we hope
that during the year 2005 a decision will be
taken in the best interest of capital markets
of the country.
In the year 2004, the Lahore Stock Exchange
(LSE) introduced System Audit Regulations
by which the system audit of the LSE
Members has been made compulsory. This
would ensure that the LSE Members comply
with the laws regulating the trading in the
securities market.
goal is to bring LSE up to international
standards in operational, technical, regulatory
and quality management areas and to ensure
that not only domestic but also foreign
investors are attracted to the Exchange.
FUTURE OUTLOOK
In 2005 Lahore Stock Exchange plans to:
• continue with its strategy of increasing its
geographical outreach through the use of
information technology in order to attract
higher trading volumes. LSE has already
successfully opened its first branch office at
Faisalabad and the second branch will be
opened at Silakot, very soon. Similar Offices
at Multan and Gujranwala are also being
contemplated;
• phase-out of Carry-Over Trading and its
replacement with Margin-Trading;
• frame a strategy for the demutualization
and integration of the three stock exchanges
of Pakistan in the interest of the Exchange
and capital markets of the country;
• enhance trading in the derivative market
and introduce new products;
• replace existing exposure monitoring
system with Value at Risk Margin System in
line with global practices;
Furthermore, a Surveillance Department has
also been established at the Exchange with
the primary objective of monitoring the
market activity with a view to ensure its
integrity.
The LSE has also, successfully developed
and implemented the automated trading
system (Ultra Trade). Our IT Department has
now developed a comprehensive internet
trading software branded as “Broker Net” for
the stockbrokers who want to extend their
business over the internet using their own
infrastructure.
The LSE’s major objectives remain to provide
investors with efficient and transparent
trading, safe and secure settlement and
accurate and timely information
dissemination. The LSE is also increasing its
geographical outreach by establishing
branches in other cities of the province. The
first such branch office has become
operational in Faisalabad in November 2004
while second such office is being planned in
Sialkot in 2005.
• re-design LSE official website and to
disseminate the stock alerts over the mobile
phones of investors;
• establish a centralized call centre for IT
support to traders;
• market BrokerNet-Broker hosted Internet
Stock Trading Solution;
• promote and market the indigenously
developed trading software i.e. Ultra Trade
and related systems to other stock
exchanges;
• implement a regular timetable for the
Broker System Audit, in order to build
investors’ confidence;
• strengthen the surveillance function of the
Exchange; and
• enhance investor education activities.