KARACHI, Dec 18: The Karachi Stock Exchange released its annual report and accounts for the year 2002, on Wednesday. Managing director Moin Fudda, who signed the directors’ report, stated that to enhance market stability, transparency of the operations and broad-based equity investments, the bourse was in the throes of executing a number of structural reforms. These included: implementation of new trading system capable of handling significantly large volume of trades at higher speed; to carry out necessary changes in the Regulations Governing Futures Contract for its further promotion; introduction of OTC Regulations to provide for a transparent mode of investment and listing of smaller capital base companies; review of existing KSE-100 index & introduction of a new futures index and introduction of margin financing with the guidance and assistance of SECP.

The accounts showed increase of 16 per cent in the revenues of the Exchange for the year ended June 30, 2002 to Rs171.0 million, from Rs147.9 million the previous year. The improvement was attributed mainly to increase in income under the head of listing fees. Deficit for the year before income tax stood reduced to Rs30.3 million, from Rs31.5 million in 2001.

The 55th annual general meeting of members has been called on Thursday, December 19, which would also elect 5 directors from amongst the validly nominated candidates under Article 22 of Articles of Association of the Exchange.

On the forward pages of the report, the KSE proudly displays quotes from international press (USA Today and Business Week) which in their September issues termed the Karachi bourse as the ‘best performing stock market in the world this year.’

Both, chairman Salim Chamdia and the MD Moin Fudda, mentioned in their reports that the KSE-100 index had shot up 80 per cent from 1273.07 points in the beginning of the year to 2285.48 points on November 27, 2002 (noticeably, the bourse has provided updated figures to end-November this year, from the previous practice of giving out end of October statistics). The market capitalization during the year had recorded net appreciation by Rs223 billion to Rs519 billion, from Rs296 billion and the daily turnover was up to 151 million shares, from 97 million shares last year.

The MD recognized that there had not been any significant improvement in the number of new listings during the period and only 4 companies with paid up capital of Rs6,318 million were listed, but said that a new marketing and investment promotion committee had been constituted to introduce various measures, including inviting new listings and awareness amongst small investors about the working of the stock exchange. The operation of National Clearing Company was also being further accelerated to bring more companies under its fold.

Chairman Salim Chamdia stated that several proposals forwarded by the Exchange were approved in the Federal Budget 2003, which included withdrawal of tax on bonus shares, reduction of withholding tax from 10 to 5 per cent on brokerage and commission received by stock brokers as well as the decision to progressively reduce tax rates for banking companies, all of which went to encourage investment in equities.

Directors report said that some of the structural changes brought about by the present regime were quite encouraging in restoring confidence of investors in the equity market.

The KSE MD observed that during the year, the Exchange had continued with its developmental efforts and in order to enhance market’s stability and transparency as well as restoring investors’ confidence, a number of measures were introduced.

These inter-alia included implementation of regulations governing short selling in order to regulate the feature of short selling, revision of the COT (badla transaction) procedure for 10 trading days period to avoid abrupt withdrawal of finance, restructuring of the board and implementation of undisclosed trading system to stop identity of the trade both before and after execution and avoid market manipulation and front running.

Some of the other features reported in the annual report included: Compared with 4 new companies listed with capital of Rs6.3 billion, 15 new debt instruments were listed with capital of Rs7.9 billion and net inflow of foreign investment recorded at Rs151.9 million during the year, compared with a huge outflow of Rs8.4 billion last year.