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11 th ASEA Conference 2007

11 th ASEA Conference 2007. Overview Emerging Capital Markets. Global Landscape. Globalization is happening, Faster than ever……….. like any other industry (This has become, more or less, a Natural Phenomenon….)

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11 th ASEA Conference 2007

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  1. 11th ASEA Conference2007 Overview Emerging Capital Markets

  2. Global Landscape • Globalization is happening, Faster than ever……….. like any other industry (This has become, more or less, a Natural Phenomenon….) • This can be termed as “Expansion from outer shell, and consolidation from within the shell. • US & Euro Zone are key players, 80% of world’s capital flows in 2005 were among the US, Britain & Euro Zone.

  3. Regionalization • Regionalization is shaping up, to some extent… (APAC, SAGE, ME, Africa) • Asian markets have been fragmented, and remained isolated from one another. Therefore these have been largely outside the global financial loop. • Consolidation will start happening, after regional cross-trade and Demutualization activities. Signs have started showing up, that people and exchanges have started talking to each other, in order to attract cross-flow of capital.

  4. 2007 Outlook of PAKISTANI Exchanges

  5. Major Milestones 1987 • First Phase of Reforms started (like Corporate Law Authority (CLA) imposed condition that companies would be listed at both LSE and KSE simultaneously. However this condition was removed in July 1991. 1993 • Central Depository Company of Pakistan Limited (CDC) was incorporated to manage and operate the Central Depository System (CDS). 1994 • Major Automation program started. • Pakistan Credit Rating Agency (PACRA), the first credit rating agency was established. 1995 • Introduction of T+3 settlement system. • Members’ Contribution Fund was established

  6. Major Milestones 1996 • LSE was the first Exchange in Pakistan to introduce automated trading. 1997 • Second Major Capital Market Development & Reforms Program started, funded by Asian Development Bank with US$255 million loan. • The process of restructuring of CLA was initiated. • Investors Protection Fund was established. 1998 • First restructuring of Exchange Board of Directors with induction of 5 outside Directors and appointment of independent Managing Director. 1999 • The Securities and Exchange Commission of Pakistan (SECP) succeeded the CLA.

  7. Major Milestones 2001 • LSE launch Internet Trading System. • The National Clearing Company of Pakistan Limited (NCCPL) was incorporated to replace the separate and individual Clearing Houses operated by each of the three Pakistani Stock Exchanges. 2002 • KSE was declared as the Best Performing Stock Market of the World for the year 2002 by international magazine “Business Week”. • Code of Corporate Governance was incorporated in the Listing Regulations. • LSE implemented automated Trade Risk Filter (TRF) to monitor the members’ trading exposure on real time basis. • Banks and financial institutions were allowed to become Associate Member of LSE Clearing House. • Trading in Futures Contracts was introduced. • LSE launched new LSE-25 Index.

  8. Major Milestones 2003 • Exchange Board was restructured. The Board of Directors constituted 10 members, of whom 5 are elected members of the Exchange, 4 are non-members nominated by SECP, an a Managing Director, who is also non-Member. • Surveillance Mechanism introduced and established. 2004 • The System Audit of members was introduced. • Clearing and Settlement Operations of exchanges were switched over to the National Clearing Company of Pakistan Limited. • Remote Trading Floor established (in other cities) 2005 • LSE launched a series of investor education and awareness programs. • Investigation & Enforcement Unit was setup to maintain a check on the market abuses.

  9. Major Milestones 2006 • Unified Trading Platform for LSE & ISE initiated. • The Finance Act 2006 included provisions for corporatization and demutualization of Exchanges in Pakistan. 2007 • Common Trading Platform launched, through Unified Trading System (UTS).

  10. Team Players in Capital Market • Securities & Exchange Commission (SEC) • Central Depository Company (CDC) • Clearing & Settlement Company (CSC) • Credit Rating Agency (CRA) • Commodity Exchange Company (CEC)

  11. LSE Volume Pattern After Automation Daily Volume grew from 1M to 14M in 6 months. Symbols traded increased to over 100, from 15

  12. KSE-100 Index

  13. LSE-25 Index

  14. Corporate stock vs. Corporate Debt • Corporate Stock is NOT the financing method most relied upon. • Corporate Debt is the dominant financing method

  15. AVERAGE DAILY TURNOVER IN REGIONAL MARKETS

  16. KSE was the world’s best performing market of 2004. From 1999 to 2004 index increased by 341%...... Best Performing Market in the World

  17. The main factors that investors consider when evaluating the attractiveness of an emerging market; Economic Development Sustainability of economic achievement and growth Resilience to adverse internal or external events Market Development and Operational efficiency Clear market regulations and enforcement of laws Efficient Settlement of trades Availability of market data and disclosure of information in general Accessibility to Foreign Investors Foreign investment restrictions Freedom of capital flows What do Investor look for ?

  18. Economic Reforms • Corporate Reforms • Capital Market Reforms & Initiatives • Governance • Technology Reforms • Settlement & Clearing System • Seamless and Fully Automated Systems for Efficiency & Transparency • Risk Management REFORMS AGENDA

  19. INVESTING IN STOCK MARKET • Foreign investors are at par with local investors, 100% shareholding is allowed • Free repatriation of Dividend and Principal • There is no capital gain tax on listed securities INVESTING IN STOCK MARKET • Dividend is taxed as a separate block of income at 10% • Corporate tax rate is 35% for listed companies • Easy fund-raising through IPO/ PO REFORMS AGENDA

  20. There could be 100+ factors for considerations, but key priorities should be; • Adopting Closet Possible Business Model • Typically SAGE model will FIT because of similar Socio-economic demography, Education, Per Capita, GDP, Banking Systems etc. • Bringing Innovations (Localization) • Crafting Simple and Attractive Business Rules • Leveraging Technology • To achieve Efficiency, Transparency and Seamless Processing (it should be Simple, Adaptable, and Cost-Effective) • Governance (Regulations) How African Market should move ?

  21. Thank You Contacts InfoTech (Private) Limited 12-N Gulberg-II, Lahore-54660 PAKISTAN +92 42 111-427-427, www.infotech.com.pk Naseer A. Akhtar, Mobile: +92 300 841 5333, naseer@infotech.com.pk Suresh Agarwal, Mobile: +65 96661106, agarwal@infotech.com.pk

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