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    Chapter # 8 Paistan Stock Exchange

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    Chapter # 8 Paistan Stock Exchange

    Uploaded by

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    4 views31 pages

    Chapter # 8 Paistan Stock Exchange

    Uploaded by

    hamayoonghaloo1

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 31

    WHAT IS AN INDEX

    • The market indexes are the barometer for


    the market behaviour. It gives a general idea
    about whether most of the stocks has gone
    up or down.
    The primary objective of the Index is to have a
    benchmark by which the stock price performance can be
    compared to over a period of time. In particular, it is
    designed to provide investors with a sense of how the
    market is performing.
    Thus, it is similar to other indicators that track various
    sectors of the economic activity such as the gross
    national product, consumer price index, etc.

    Some major international indices are NYSE, FTSE


    (London), NZSE 40, SENSEX 30 etc
    New Zealand's 40 index
    • The NZSE 40 contains New Zealand's 40 largest and most
    liquid companies and is the main barometer for the New
    Zealand market, just as the Dow Jones Index is the
    barometer for the day-to-day performance for the US
    market.
    • Equity Indices refer to the various sector indices such as
    oil and gas, textile, leisure & tourism, forestry etc
    • The NZX 50 is a headline stock market index which tracks
    the performance of 50 largest and most liquid companies
    by free float market capitalization, listed on the New
    Zealand Exchange. It is a total return, modified market
    capitalization weighted index. The NZX 50 Index has a
    base value of 1880.85
    On November 1, 1991 the KSE 100 Index was
    introduced.
    It is capital weighted index and consists of 100
    companies
    KSE 100 Index stocks has a representation of all the
    market sectors of PSX.
    The Index represents 85% of all the market
    capitalization of the Exchange.
    It is calculated using Free Float Market
    Capitalization methodology.
    • ON - LINE COMPUTATION OF THE INDEX

    During market hours, prices of the Index scrips, at


    which trades are executed, are automatically used by
    the trading computer to calculate the KSE-100 Index
    and continuously make up-dation on all trading
    workstations connected to the KSE trading computer
    on real time basis.
    The selection criteria for stock inclusion in the
    recomposed KSE 100 Index are:

    SECTOR RULE
    Largest market capitalization in each of the 35
    sector of the Exchange.
    Note that only Oil and Gas Tradable Sector Index (OGTI) : The Tradable Oil & Gas Index
    tracks at least 80% free-float market capitalization of the Oil & Gas Sector.

    CAPITALIZATION RULE
    The remaining companies are taken up on the
    basis of market capitalization companies in
    descending order.
    A number of the 35 top sector companies may also
    qualify for inclusion on the basis of their market
    capitalization: i.e. companies may qualify under
    Sector Rule or under Capitalization Rule, or under
    both. However, in that case the company shall be
    included on the basis of Sector Rule.
    Close-end Mutual Fund Tobacco Chemical

    Modaraba Refinery Paper & Board

    Leasing Companies Power Generation & Vanaspati & Allied


    Distribution
    Inv. Banks / Inv. Cos. / Sec. Leather & Tanneries
    Cos Oil & Gas Marketing
    Companies Foods & Personal Care
    Commercial Banks Products
    Oil & Gas Exploration
    Insurance Companies Glass & Ceramics

    Textile Spinning Engineering Miscellaneous

    Textile Weaving Automobile Assembler

    Textile Composite Automobile Parts &


    Accessories
    Woollen Cables & Electric Goods
    Synthetics & Rayon Transport
    Jute Technology & Communication
    Sugar & Allied Fertilizer
    Cement Pharmaceutical
    CLOSE - END MUTUAL FUND Companies

    • Dominion Stock Fund Limited.


    • First Dawood Mutual Fund.
    • Golden Arrow Selected Funds Limited.
    • Investec Mutual Fund.
    • PICIC Growth Fund.
    • PICIC Investment Fund.
    • Prudential Stocks Fund Limited.
    • Tri-Star Mutual Fund Limited.
    Difference between open end and
    closed end mutual funds
    • A closed-end fund has a fixed number of shares
    offered by an investment company through an initial
    public offering.

    • Open-end funds are offered through a fund company


    that sells shares directly to investors.

    • *Unlike open-end funds, new shares in a closed-end


    fund are not created by managers to meet demand from
    investors.
    SECTOR RULE:
    Sector rules govern the selection (or deletion) of companies on
    the basis of being the top Free-Float Capitalisation stock in each
    of the 35 PSX sectors (excluding Open-end Mutual Fund sector)
    Value-based Rule:
    A company which is the largest in its sector by a minimum of
    10% in capitalization than the present largest in the sector (in
    the index) will enter in the index on re-composition.
    Time-based Rule:
    A company which is the largest, but not more than 10%
    greater in value than the present largest company in the
    sector will enter the index after maintaining its position as
    largest in the sector for two consecutive re-composition
    period.
    CAPITALIZATION RULE:

    Time-based Rule:
    A company may qualify for entry if it exceeds the
    market capitalization of the last stock in the index
    selected on the basis of market capitalization for two
    re-composition periods.

    A qualifying company automatically pushes out the


    lowest capitalization selected stock in the index.
    RULES FOR NEW ISSUES:

    A newly listed company or a privatized company


    shall qualify to be included in the existing index (on
    day of recomposition) if the market capitalization of
    the new or privatized company is at least 2% of the
    total market capitalization.
    VALUE Companies largest in its Sector by a
    BASE minimum 10% at the last cut off date.

    TIME Companies which are greater but less


    BASE than 10%. INDEX

    SECTOR BUFFER
    Companies will enter the Index after
    maintaining its position for last Two cut
    off dates.
    TIME BASE

    Companies which are amongst the top 66


    companies on market capitalization basis.

    MARKET CAP. BUFFER


    Companies will enter the Index after maintaining its
    position for last Two cut off dates.

    INDEX
    Hypothetical Example
    Step 1
    The Base Period Day 1
    Stock Share Price No. of Shares Market Value
    (Rs.) (Rs.)
    A 20.00 50,000,000 1,000,000,000.00
    B 30.00 100,000,000 3,000,000,000.00
    C 40.00 150,000,000 6,000,000,000.00
    Total Market Capitalization 10,000,000,000.00

    Note: Base Period Value / Base Divisor = Rs.10,000,000,000.00 = 1000.00


    Step 2
    Index Value as on Day 2

    Stock Share Price No. of Shares Market Value


    (Rs.) (Rs.)
    A 22.00 50,000,000 1,100,000,000.00
    B 33.00 100,000,000 3,300,000,000.00
    C 44.00 150,000,000 6,600,000,000.00
    Total Market Capitalization 11,000,000,000.00

    11,000,000,000.00
    Index = -------------------------- = 1.10 * 1000 = 1100
    10,000,000,000.00
    The formula for Calculating the KSE 100
    Index is:
    Sum of Shares Outstanding x Current Price
    ----------------------------------------------------------- x 1000
    Base Period Value

    OR

    Market Capitalization
    ----------------------------------------------------------- x 1000
    Base Divisor
    • https://tradingeconomics.com/pakistan/stock
    -market
    COMPANY NAME INDEX WEIGHTAGE
    O. G. D. C. 23.82
    P. T. C. L. “A” 7.30
    Pakistan Petroleum Limited 6.50
    National Bank of Pakistan Limited 6.48
    MCB Bank Limited 4.27
    United Bank Limited 3.29
    Pakistan Oilfields Limited 2.89
    Fauji Fertilizer Company Limited 2.20
    Pakistan State Oil Company Limited 2.03
    Sui Northern Gas Pipelines Limited 1.93
    COMPANY NAME INDEX WEIGHTAGE

    INFOSYS TECHNOLOGIES 9.50


    RELIANCE 8.86
    ICICI BANK 7.61
    ITC LTD 7.44
    HDFC 4.35
    HINDUSTAN LEVER 4.35
    LARSEN & TOUBRO 4.35
    ONGC 4.07
    TELEVENTURES 3.97
    SATYAM COMPUTERS 3.59
    • Globally, the Free-float Methodology of
    index construction is considered to be an
    industry best practice and all major
    index providers like MSCI, FTSE, S&P,
    STOXX and SENSEX have adopted the
    same. MSCI, a leading global index
    provider, shifted all its indices to the
    Free-float Methodology in 2002.
    The Market Index Point

    • A point in a market index is a concept used


    to measure the value of the securities listed
    in the index. However, the point will have a
    different meaning depending on whether it
    is a stock market index or a bond market
    index.
    Single Point Definition

    • Consider a point from the perspective of a


    single share of common stock, a single point
    and an individual investor. Here, a single point
    is the equivalent of $1. If a stock currently
    trading at $50 per share rises to $55 per share
    or falls to $45 per share, the rise or fall equates
    to five points. This information helps you
    monitor the performance of stocks you already
    own and is useful for evaluating a stock you
    may be thinking about purchasing.
    • https://finance.zacks.com/stock-market-poin
    ts-vs-percent-6029.html

    • https://www.investopedia.com/ask/answers/
    what-are-points-on-the-dow/#citation-5

    • https://bizfluent.com/facts-6046751-market-
    index-point-.html

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