The Pakistan Stock Exchange (PSX) has made significant progress in the last over seven years since its formation in January 2016, transforming itself into a dynamic financial marketplace. Today, it is a key player in the region, offering diverse investment opportunities and contributing to the overall development of the country’s economy.

Integration of three exchanges

In 2016, the Karachi, Lahore and Islamabad stock exchanges were integrated into a single entity – the Pakistan Stock Exchange. The aim was to ensure a smooth working process and pave the way for more investment. During the year, the total number of listed companies increased to 558. The total market capitalization also increased to Rs9.26 trillion compared to PKR6.92 trillion in the previous year. Globally, the KSE-100 Index outperformed most of the market benchmarks with its returns leading Asia as well as the MSCI frontier markets and securing 5th place worldwide.

Progress of capital market in CY16

      (PKR in million)

Total number of listed companies    558

Total listed Capital-PKR      1,291,040

Total market capitalization-PKR     9,628,514

KSE-100 Index     47,807

Source: Pakistan Stock Exchange

Development on Chinese investment

China also acquired a large stake in the power utility sector. To be specific, the Shanghai Electric Power Company acquired 66.4% stake in the K-Electric — Pakistan's largest power utility company. This development positively impacted the stock market, bringing in $1.77 billion foreign investment. As a result, the KSE-100 index saw an increase of 1,000 points.

Another significant investment was made by Huaneng Shandong Ruyi (Pakistan) Energy Private Limited, which pumped $1.5 billion into a coal power project, increasing job opportunities and economic activity. CY16 was one of the splendid years for the equity market. The strong performance of the PSX during the period may be attributed to a positive economic outlook, availability of liquidity and low interest rates.

PSX upgradation to MSCI emerging markets

Owing to its outstanding performance, the PSX was upgraded to the MSCI emerging markets status in May 2017, opening its doors to the global investors that tracked the index with $1.4-1.7 trillion in hand. It was declared the best-performing stock market in Asia. However, after touching the historical high, the stock market underwent a roller-coaster ride during the year.

The KSE-100 index carried on the last year’s growth momentum, reaching a historic high in May before suffering sharp corrections in June and July. Thereafter, the market witnessed a partial recovery. Overall, a decline of 15.6% in the KSE-100 index in CY17 was the second largest fall after the 2008 crisis when the equity market dropped by 58.3%.

Completion of divestment process

In 2018, the PSX successfully sold off 40% of its shares as mandated by the Stock Exchanges (Corporatization, Demutualization, and Integration) Act 2012. The shares were sold to a consortium of investors, which included the China Financial Futures Exchange (CFFEX), Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE), Pak China Investment Company Limited (PCICL), and Habib Bank Limited (HBL). During the year, a number of projects were announced and the KSE crossed the 45000-point mark. However, after that the market underwent correction and the index kept going up and down.

 Launch of ETF framework

In FY2019, the PSX introduced this operational and regulatory framework to assist the launch of Exchange Traded Funds (ETFs). In this regard, the PSX collaborated with the Securities and Exchange Commission of Pakistan (SECP) and three Asset Management Companies (AMCs). Significant work was completed in systems development and backend work for trading in Ijara, Sukuk and PIBs, where the PSX partnered with several liquidity providers to launch fixed income products. The market performed well in 2019 due to the launch of ETF framework and fixed income products as market capitalization increased in 2019 compared to the previous year.

 Progress of capital market in Pakistan

      CY17  CY18  CY19

                  (PKR in million)

Total number of listed companies    559   546   534

Total listed Capital-PKR                       1,276,914                   1,322,748                   1,386,599

Total Market Capitalization-PKR                      8,513,478                   7,692,787                   7,811,812

KSE-100 Index                           40,371                      37,067                      40,735

Source: Pakistan Stock Exchange

In 2019, the total number of companies was 534, while the total listed capital was PKR1.38 trillion compared with PKR1.32 trillion in CY18. The total market capitalization was PKR7.81 trillion as against PKR 7.69 trillion in CY18. The KSE-100 Index increased to 40,735 points in CY19 from 37,067points in CY18.

 Launch of Exchange Traded Funds (ETFs)

In 2020, one of the major developments of the PSX was the launch of Exchange Traded Funds (ETFs).

Launch of two new indices

During the year, two new indices – NIT Pakistan Gateway Index (NITPG Index) and UBL Pakistan Enterprise Index (UPP9 Index) – were introduced to allow the ETFs to track a particular index.

ISO certification

The award of ISO/IEC 22301 Business Continuity Management System (BCMS) certification marked an important turning point for the PSX, making it an ISO-certified organisation. The PSX faced many challenges during the year due to the outbreak of COVID-19 pandemic.

New trading system

The PSX introduced a new trading system, which is now working in tandem with old KATS system being operated for the past 20 years. SZSE – the new trading system acquired from the Shenzhen Stock Exchange (SSE) – is known for its high level of safety, advanced features, reliability, superior performance, low latency, and strong scalability.

It has an impressive track record of 17 years of safe operation without any trading interruptions. This system has undergone rigorous testing and is capable of handling 2,000 orders per second and 4 million transactions per day, which is over 10 times the current trading volume. If needed, the system can be easily scaled up by adding more servers.

Integration with payment gateways

In 2016, NIFT and 1-Link web services for e-payment gateways were successfully integrated by the Information Technology Department of the PSX. The TREC holders (Trading Right Entitlement Certificate Holders) and banks may easily collect subscription requests, subscription costs, register customers, and process online payments.

Development of e-IPO Portal

In FY2020–2021, the PSX Information Technology Department (ITD) successfully carried out three e-IPO events. An internal software was created for Electronic Initial Public Offerings (e-IPO) to streamline the procedure, making it possible for local and international citizens to benefit from the global services. The system also enabled the registrars to rapidly handle refunds, broadcast the results of balloting, and notify successful applicants.

Upgradation of network infrastructure

The ITD upgraded the network infrastructure by deploying state-of-the-art equipment such as routers, switches, and firewalls. This upgrade resulted in a remarkable increase in data centre connectivity speed, reaching up to 40Gbps, which is 40 times faster than the previous speed. Furthermore, the network connectivity for brokers was enhanced from 1Gbps to 10Gbps to meet the requirements of the new trading system.

The KATS network equipment utilized outdated technology and incurred increasing SLA (Service Level Agreement) costs each year. With this upgrade, the ITD can now ensure a seamless and efficient delivery of trading data for the customers and affiliated companies, promoting smooth operations and improving service quality.

Upgradation of Hot DR Site

The Hot Disaster Recovery (DR) site has undergone upgrades to align with the needs of the new trading and surveillance system. The site is continuously synchronized in real time, ensuring that in the event of a failure at the primary site of PSX, the trading services can quickly resume. This activity has yielded successful results within the designated timeframe, enhancing the overall resilience and continuity of the PSX's operations.

Fresh listings doubled during CY21, while the number of listed companies increased to 533 from 531 last year. Nonetheless, the listed capital grew by 4.4% in CY21 to PKR1.48 trillion. The KSE-100 crossed 44,596-point mark in 2021, while the KSE-30 crossed 17,501.

Stats (2021)      KSE-100     KSE-30

Index 44,596      17,501.69

% Change    -1    0.41%

The KSE-100 top five performers are TRG Pakistan Ltd, Pakistan Tobacco Company Ltd, Standard Chartered Bank (Pakistan) Ltd, Honda Atlas Cars (Pakistan) Ltd and Yousaf Weaving Mills Ltd with return of 35%, 13%, 13%, 12% and 12% respectively. The KSE-100 historical performance for 2021 is given below:

Issuance of IPOs

The major development of the year in the equity market was the issuance of Initial Public Offerings (IPOs). During the period, five companies (Citi Pharma limited, Pakistan Aluminium Beverages Cans Limited, Airlink Communications Limited, Octopus Digital Limited, and Adamjee Life Assurance Company Limited) issued shares through a public offering on the main board of PSX, while two companies (Pak Agro Packaging Limited and Universal Network Systems Limited) were listed on the newly introduced Growth Enterprise Market (GEM) Board.

In CY22, the KSE-100 crossed the 40,420-point mark, while the KSE-30 crossed 14,836.

Stats (2022)      KSE-100     KSE-30

Index 40,420      14,836.41

% Change    -4.55%      -5.09%

In March 2022, the total companies listed on the PSX were 532 with market capitalization of Rs7,583 billion. The KSE-100 top five performers were the Pakistan Services Ltd, Pakistan Petroleum Ltd, Oil & Gas Development Company Ltd, Pak Suzuki Motor Co. Ltd and Honda Atlas Cars (Pakistan) Ltd with returns of 121%, 21%, 10%, 10% and 9% respectively. In 2022, the PSX hosted a briefing session on the CPEC for the capital market participants and the media on the background, scope and latest developments of CPEC.

In CY23, the KSE-100 crossed the 40,000-point mark, while the KSE-30 crossed 14,852.

Stats (2023)      KSE-100     KSE-30

Index 40,000.83   14,852.81

% Change    -1.26%      -2.20%

During the current year, the KSE-100 top five performers are Pioneer Cement Ltd, Century Paper & Board Mills Ltd, Tariq Glass Industries Ltd, Pakistan Stock Exchange Ltd and Shifa International Hospital Ltd with returns of 22%, 18%, 16%, 14% and 11% respectively.

Credit: INP-WealthPk