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Market Booms and Busts , and their impact on Central Securities Depositories. Market Booms and Busts, and their impact on Central Securities Depositories. By Muhammad Hanif , CEO – CDC Pakistan. About the Presenter. Chief Executive Officer of CDC Pakistan

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slide1

Market Booms and Busts,

and their impact on Central Securities Depositories

Market Booms and Busts,

and their impact on Central Securities Depositories

By Muhammad Hanif , CEO – CDC Pakistan

slide2

About the Presenter

  • Chief Executive Officer of CDC Pakistan
  • Chartered Accountant by profession
  • Founding Member of the Central Securities Depository and Clearing & Settlement Company in Pakistan
  • Advocate of investor cultivation, awareness and protection in Pakistan
  • Serving as a Director on the Boards of Pakistan Mercantile Exchange Limited and Institute of Capital Markets, Pakistan
slide3

About CDC Pakistan

  • Pakistan is one of the Next Eleven Markets named by
  • Goldman Sachs.
  • Incorporated in 1993, CDC is the only depository of
  • Pakistan. Apart from depository operations and retail
  • investor account services, the company’s portfolio
  • includes:
    • Trustee & Custodial Services
    • Shares Registrar Services
    • IT Minds Limited
slide4

“One heavy blow is not enough to produce a market crash. It requires several different blows to bring a market to its knees.”

David Shwartz, stock market historian

slide6

SPECULATION & WARNING

Despite the dangers of speculation, many believed that the US stock market would continue to rise indefinitely.

slide7

The US stock market collapsed on October 29, 1929. It was the most devastating stock market crash in the history of both the US and the world.

slide8

STOCK MARKET HYSTERIA

On the day of the collapse, the share prices fell as low as 89 percent. The NY stock exchange lost $14 billion in value, ten times the annual budget of the federal government at that time.

slide9

GREAT DEPRESSION

1929-1940

The subsequent 10-year long Great Depression effected all western industrialized countries. It effectively stifled high-risk investment in the U.S. until after World War II.

slide10

GREATEST FINANCIAL CRISIS EVER

The crash led to the biggest financial crisis of the 20th century, with mass foreclosures & falling prices, untold bankruptcies and business closures & repossessions.

slide11

MASSIVE UNEMPLOYMENT

A quarter of working people (13-15 million) were unemployed, with soup kitchens serving to hundreds and thousands at a time.

risks that involve
Risks that involve…
  • Volatility & Uncertainty
  • Highly dependable external factors like war, political situation,

security conditions, natural disasters,

currency devaluation, tax implications, etc.

  • Rumor Mongering
  • Domino Effect
impact on other stock market institutions
Impact on other Stock Market institutions
  • Revenue Management
  • Resource Management (IT & Human)
  • Difficult Strategic Planning
the pakistan capital market
The Pakistan Capital Market

Just like any other stock market, the Pakistan Capital Market

(including The Karachi Stock Exchange) is a volatile market.

However, despite challenges, it has progressed

continuously and has had an upward index trend.

how was the pakistani crisis different from the global crisis
How was the Pakistani Crisis different from the Global Crisis?
  • Started Earlier then the Global crisis.
  • Global crisis had a “Multiplier effect” on Pakistan’s Economy, where FTSE 100, Dow Jones and Hang Seng fell 31.33, 33.84 and 48.27 percent respectively in 08, KSE 100 index fell 58.34 percent in 08.
  • Had more direct impact on Investors and stock brokers then Issuers.
causes
Causes
  • On 21 April 2008, KSE touched its pinnacle by reaching 15,739.
  • Downward rally started in May 08, on rumors of new tax in the upcoming budget.
  • SBP started raising interest rate also from May 08.
  • Political/Law & Order situation in Pakistan further aggravated the crisis.
  • Freezing of market for almost 100 days.
but we survived how
But we survived... How?
  • Started diversification in 2002
  • Cost Controlling
  • Spread tariff
  • Better management
despite the financial crisis we
Despite the Financial Crisis... We:
  • Continued dividend payouts
  • Continued tariff cuts
  • Continued market support
  • Continued diversification
lessons from cdc
Lessons from CDC
  • To hedge the risk of boom and busts, CDC
  • took some concrete steps which include:
    • Business Diversification
    • Capital Adequacy
    • Depository Risk Insurance
    • Investor Protection
    • Compliance & Surveillance
    • Better Planning
business diversification ensured sustainability
Business Diversification Ensured Sustainability
  • CDC diversified its business in a number of areas and entered new sectors and industries, which include:
    • Trustee and Custodial Services for mutual and pension funds
    • Share Registrar Services for Issuer Companies
    • ITMinds Limited (IT Consultancy & Implementation Services)
trustee custodial services
Trustee & Custodial Services

Launched in 2002, this service offers safe keeping of assets, settlement of transactions made by Fund Managers and ensures compliance of constitutive documents and relevant legal frame work to safeguard the interest of the unit/certificate holder.

Today, CDC is the most preferred Trustee & Custodial Service provided to the Mutual Fund Industry in the country.

share registrar services
Share Registrar Services

CDC started Registrar Services in 2008. It offers a composite portfolio of maintenance, registration, verification, handling corporate actions and direct customer dealing for Issuers and their Shareholders.

(As of June 30, 2013)

limited
Limited

Founded in 2009, ITMinds is provider of

information technology, consulting and

business-process services.

Focus:

  • Microsoft and IBM based competencies and technologies

Services:

  • Enterprise Technology consultancy and implementation services
  • Training, Ongoing Sustenance and Support services
investor protection convenience
Investor Protection & Convenience
  • CDC took several initiatives to enhance investor protection and convenience. Some of these initiatives include:
    • Business Continuity Planning
    • Free-of-Cost CDC Access
    • Simple Account Opening Form
investor account services ias
Investor Account Services (IAS)

Launched in 1999, CDC’s Investor Account Services (IAS) is a unique service offered by CDC with minimal charges.

Over the years it has become a brand reflecting safety, security, reliability and trust. The main focus of CDC, since launching this service, has been on providing quality service and increasing efficiency of the processes so as to ensure that there are no complaints of mishandling of securities.

value added services for investors
Value added services for investors
  • IVR – is a round-the-clock Interactive Voice Response system, supported by an state-of-the-art call centre.
  • Web– enables Account holders to access their account information via Web.
  • SMS– gives an added level of convenience to investors by providing them their account movement information on their mobile screens.
  • eStatement - provides Account Balance Statements in the clients email inbox on a monthly or quarterly basis.
  • eAlert- provides real-time email alerts about activities in the Investor Account in clients inbox
future
Future
  • CDC Pakistan is fully geared up for the following strategic actions in future:
    • Bringing the Non-Depository related Revenues in excess of 50%.
    • Launching more businesses / services in other industry sectors like insurance, banking, etc.
    • A Centralized Information Sharing Solution for Insurance Industry is already in its launch phases.
    • Government Securities