Investors

The Stock Exchange is a place where shares of listed companies are bought and sold. Companies list themselves on the stock exchange to raise capital. Shares of companies are traded, after they are listed, through a process of Initial Public Offering (IPO) or Secondary Public Offering (SPO). The share purchase represents ownership of the shareholder in a company to the extent of amount contributed by the investor to the capital of that company.

Corporate Bonds (Term Finance Certificates - TFCs etc.) and Government Debt Securities - GDS (Treasury Bills etc.) are also listed and traded on the Stock Exchange. Bonds are listed by a company that wants to raise capital in return for fixed periodic payments as mark-up and the eventual return of principal to the investor. GDS are listed by the Government to raise capital whereby the securities give fixed periodic returns as profit with eventual return of principal to the investor.

A company floats its shares for the first time through an IPO in the share market. These shares can be purchased by filling and submitting the share subscription form along with the payment of subscription amount through cheque (or through any other instrument of payment recommended by the issuer company) at a branch of the designated bank(s). The shares are subscribed at a pre-designated price. In an SPO, shares are offered by a listed company by way of issuing new shares, called Right Shares, or through off-loading of more shares (held by directors and others) in the market. The share price is set on the stock exchange platform as the shares are bought and sold.

Pakistan Stock Exchange (PSX) has 558 listed companies distributed amongst 40 sectors. There are 7 Indices listed on PSX board. Part of the PSX ecosystem are the CDC (Central Depository Company) through which delivery of shares takes place, and NCCPL (National Clearing Company of Pakistan Limited) through which settlement of shares takes place.

Potential Investors are advised to contact a TREC (Trading Rights Entitlement Certificate) holder/ licensed brokerage firm for their account opening and trading on the Stock Exchange.

Download Investor Awareness Guide

  • Primary market/ IPO – Dos: A (prospective) investor must read the Prospectus/ Abridged Prospectus issued against an IPO carefully and note the following:

    • Risk factors pertaining to the issue.
    • Financials of the issuer.
    • Object of the issue.
    • Outstanding litigations & defaults, if any.
    • Business overview.
    • Background of promoters.
    • Instructions before making application.

  • Primary market/ IPO – Don’ts:

    • Do not fall prey to market rumours.
    • Do not go by any implicit/ explicit promise made by anyone.
    • Do not invest simply based on the bullish trend of the market industry/ issuer company.
    • Do not bank on the price of the shares of the issuer company going up in the short run.
    • Do not invest just because others are doing it also.
    • Do not invest just because the issuer company has a good reputation. Study the details behind the issue.

  • Secondary Market– Dos:

    • Transact only through Stock Exchange.
    • Deal only through registered brokers/ TREC holders of PSX with valid license for brokerage issued by SECP.
    • Complete all account opening formalities properly
    • Read & properly understand the risk associated with investing in securities before investing.
    • Assess the risk-return profile of the investment as well as the liquidity & safety aspects before investing.
    • Invest based on sound reasoning, taking into account all publicly available information.

  • Secondary Market – Don’ts:

    • Given the benefits of trading on the Stock Exchange, it is advisable to avoid off-market transactions.
    • Don’t deal with unregistered intermediaries.
    • Don’t fall prey to promises of unrealistic returns.
    • Don’t invest on the basis of hearsay & rumours; verify before investment.
    • Don’t forget to take note of risks involved in the investment.
    • If new to share trading, it is strongly recommended that (prospective) investor obtain proper professional investment advice before investing in shares.

Following are some of the important considerations before investing in the stock market:

Stock Investment Guidelines:

  • DIVERSIFY YOUR INVESTMENT: The best way to minimise risk is to diversify your investments across various investment products. If equities are your sole investments, it makes sense to diversify between different sectors and companies. In this way, loss incurred on some investments can be absorbed or compensated by gains made in others.

  • UNDERSTAND YOUR RISK PROFILE: As an investor, you must choose between how much risk you can take as all investments carry a certain amount of risk. Consider an investment product not only according to your requirements and how much capital you can invest, but also according to your tolerance of risk. Depending on how ‘risk averse’ or ‘risk-prone’ an investor you are, you may choose an investment accordingly.

  • DO YOUR HOMEWORK BEFORE YOU INVEST: To invest well, you must gather and understand all relevant information regarding the investment you are going to make. This includes studying companies’ annual reports, accounts and other statements while keeping abreast of what is happening in the said sector or industry. Consult your investment adviser/ stockbroker to get the latest market information about shares you wish to buy or sell. Do not buy into rumours or be pressured by anyone’s grave but unfounded recommendations before making an investment decision.

  • THINK LONG TERM: Investment in shares does not necessarily result in instant yields. Do not invest any money which you may need immediately, since the price of shares can go up and down. Studies have shown that investments properly timed and based on strong fundamentals have been proved to be very profitable for investors in the longer term.

  • JUDGEMENT OF TIMING: The aim of investing in stocks and shares is to buy at low and sell at high. Knowing when, however, is the challenge. While it is not easy to time the market, investors should try their best to buy when the upswing has begun, and sell as the downswing starts.

  • AVOID HERD MENTALITY: The stock market is driven by two emotions: greed & fear. People are usually caught up in the boom hype and pay beyond the worth of shares. This is the greed that drives bull markets. Don’t allow greed to become your need. In bear markets, people get carried away with the ruling pessimism and are eager to sell their investments believing in the worst rumours. This is the fear that dominates bear markets.

  • BEWARE OF SCAMS: Beware of promises of quick profits or sky high returns. Investors must bear in mind that higher the gain on investments, higher is the risk involved. This is the fundamental risk/ reward trade-off.

  • KEEP AN EYE ON STOCKS’ PERFORMANCE: Investors must keep an eye on the performance of stocks. They can do so through newspapers, digital media, investment magazines, brokerage firms’ research articles or through other media. A company’s stock performance can take a boost or downturn based on some fundamental changes in the company such as a structural or financial reform. Similiarly, a company can face seasonal or circumstantial boom resulting in better stock performance.

  • TAXES & COMMISSIONS: As an investor, you must know the rates of taxes and commissions charged by the Federal Board of Revenue/ Brokerage firm as these affect your costs and hence your returns. There is no prescribed rate of commissions charged and it can vary from firm to firm. Investors must take into consideration the taxes that will be deducted from the trading transactions they will undertake. (For details on current taxes and charges levy, contact your brokerage firm).

Stock Investment Basic Concepts:

  • DIVIDEND & DIVIDEND YIELD: An investor may invest in stocks of a company for its Dividends.
    Dividend is the return paid to shareholders out of the profits of the company. Dividend can be cash dividend or bonus dividend/ shares. Dividends may be paid out by a company more than once a year.
    Cash dividend provides for a measure called Dividend Yield. Yield is the measure of cash flow that an investor gets on the amount invested in a security. Dividend Yield is a financial ratio that indicates how much cash dividend a company pays in terms of its share price. Dividend yield is calculated by dividing the cash value of the dividend by the share price. It is defined in percentage.

  • EARNING PER SHARE (EPS): This is a ratio calculated by dividing a company’s net profit after tax by the number of shares outstanding. It’s a measure of the strength of the company in terms of its earning capability for each share issued.

  • PRICE EARNING RATIO (P/E): This is a ratio calculated by dividing the current share price by its EPS. It’s a measure of valuation and indicates whether the price of a share is realistic and is in-line with its earning. If the share is over-priced, then the ratio will be high and if the share-price is low, the ratio will be low.

  • BOOK VALUE OR BREAK-UP VALUE: Book Value per share is calculated by dividing the total equity of a company by its number of shares outstanding. This ratio indicates the asset coverage that each equity share represents in the company.

  • CAPITAL GAIN: Capital gain is the selling of shares at a higher price than the purchase price. Multiple such trades can result in multiple capital gain accruing to the investor.

  • COMPOUNDING: Compounding is the process in which an asset’s earnings, from either capital gains or profit, are reinvested to generate additional earnings over time. This Investment will generate earnings from initial principal and accumulated earnings from preceding periods.

  • DIVIDEND REINVESTMENT: This is the process whereby cash dividends earned from a company are reinvested for stock investment.

FINANCIAL LITERACY INITIATIVE:

Pakistan Stock Exchange has embarked on a Financial Literacy Initiative to educate potential investors about investment basics, financial planning, and stock market investments. The Initiative seeks to educate the general public about defining their investment objectives, what to expect from the stock market, begin investing in the stock market, securing their brokerage account, dos & don’ts of investing in the stock market, and considerations while investing. The Initiative also seeks to educate the general public about the operational, strategic and regulatory developments taking place at PSX.

For any further information and queries regarding the Financial Literacy Initiative or for arrangement of Financial Literacy sessions for your organization/ institution, submit your query by clicking below.

The Default and Arbitration Wing at Pakistan Stock Exchange Limited [“PSX”] (formerly: Karachi Stock Exchange Limited)

The Pakistan Stock Exchange Limited (formerly: Karachi Stock Exchange Limited), being the frontline regulator, plays a proactive role in ensuring that investors’ interest remains protected. Securing the interest of small investors is of prime importance to the Pakistan Stock Exchange Limited (formerly: Karachi Stock Exchange Limited).

In order to keep a vigilant eye on investors’ issues and to provide a platform to the general public for voicing their concerns, Default and Arbitration Wing within Regulatory Affairs Department of Pakistan Stock Exchange Limited (formerly: Karachi Stock Exchange Limited) has been set up.

The Default and Arbitration Wing is responsible for ensuring that grievances/ complaints of the general public concerning investment and trading of securities are heard and redressed, in a quick and efficient manner. This Wing is also responsible for proposing disciplinary actions against defaulting brokers.

Since 2008, this Wing has been working under the supervision of General Manager/ Chief Compliance Officer and has recommended disciplinary actions such as, suspension /expulsion/ forfeiture of membership/ TRE Certificate of 14 Brokerage Houses of Pakistan Stock Exchange Limited (formerly: Karachi Stock Exchange Limited) and settled claims valuing Rs.2.6 billion transparently.

This Wing liaises with Securities and Exchange Commission of Pakistan (SECP), National Accountability Bureau (NAB), Federal Investigation Agency (FIA), Prime Minister’s Inspection Commission (PMIC), Federal and Provincial Ombudsman Offices in the matter of complaints lodged against the Member/ TRE Certificate Holders of the Exchange.

List of Permanent Arbitrators Panel

Panel of Senior Management staff of the Exchange

This includes senior members of PSX Management. One senior member is nominated by CRO in consultation with the Managing Director-PSX for constituting sub-panel of arbitrators.

Panel of Industry Experts

Panel of TRE Certificate Holders

List of Brokers failing to comply with the Awards/Orders of Arbitrators

Status Report of Investors’ Complaint

List of Delinquent Clients

System Auditor Panel

Auditor Panel IBTS

Lodging a Complaint

Online Claim Registration Form

How fo fill E-Claim Form

Claim Form

General Instructions for complaint registration

A guide for investors - Lodging complaints against PSX Members

Enclosures (for individuals):

  • Attested copies of National Identity Card of the applicant.
  • Attested copies of National Identity Card of the Joint Holders and or Nominee(s) (if applicable)
  • Attested copies of passports of the applicant, Joint Holders and or Nominee(s) (in case of non-residents)
  • Copy of the letter of authorization from the Account Holder(s) of the person authorized to trade in my/our accounts (if other than the account holder).
  • A list of Transaction fee, Commission to be charged by the Broker and other CDC charges to be levied.

Enclosures (for corporate entities):

  • Certified true copy of Board Resolution (specimen provided as per Annexure-A below).
  • Certified true copies of Memorandum & Articles of Association.
  • List of authorized signatories.
  • List of nominated persons allowed placing orders.

You can invest and trade in the stock market through TREC (Trading Rights Entitlement Certificate) holders/ brokerage firms recognised by PSX and licensed by the Securities & Exchange Commission of Pakistan (SECP).

You must shortlist a number of brokerage firms based on your individual preference. You must talk to the shortlisted firms and make your final selection based on your requirements. You may select your brokerage firm depending on:

  • Ease of communication & understanding of your defined investment objectives.
  • Availability of research material.
  • Availability of online trading facility.
  • Provision of trade confirmations.
  • Brokerage charges levied.
  • Physical proximity to your work-place or residence.

Why Save & Invest:

You want to live your life and follow your dreams. We all have a list of things that we want to achieve in our lives which require money to attain them. These may include goals for the near future like:

  • Planning the next vacation
  • Buying a home theater
  • Planning a destination wedding
  • Renovating your house
  • Upgrading your car

There is also a list of things you have to do in the distant future. These life goals may include:

  • Children’s college and university education
  • Investment for retirement
  • Entrepreneurial set-up
  • Buying your own house

All these life goals are achievable if you plan well, save early and invest prudently

While planning our investments we must also account for the unforeseen and emergency situations we may be faced with. Life is unpredictable and we can come across any situation like:

  • Severe/ terminal disease
  • Accidents
  • Loss of employment or business downturn

All the above need planning our investments. In order to invest, we begin with savings. We must invest our savings to ensure:

  • We beat the effects of inflation which eats up the value of our money.
  • We multiply/ increase the value of our money saved instead of leaving it idle

If you have thought of all of the above, Congratulations - You are ready to save and invest!

BEGIN SAVING:

You can start saving as early as possible. Perhaps a chunk of your salary should be saved every month until you have enough to invest; a rule of thumb is to save 20% of your income. At the same time, if you have family support or other sources of income, a monthly addition of these funds can definitely help you save more until you have enough funds to start investing.

BEGIN INVESTING:

There are many savings & investment plans and products available in the market to choose from. If you keep your money in a bank account, you will get nominal returns on your savings. However, you are bound to get higher returns and cushion yourself against risk if you can invest your savings in a diversified portfolio of different investment vehicles such as:

  • Bonds
  • Treasury Bills (T-Bills)
  • Term Finance Certificates (TFCs)
  • Mutual Funds
  • Stocks

WHERE TO INVEST:

It is always a good idea to invest your money where you get good returns.

The stock market is one such avenue where there is good upside potential, historically, and where the returns have been higher than those from other investment avenues. Investing for the long term is a better option than investing for the short term in the stock market. It will not only allow you to compound your earnings but will also enable you to earn dividends which can be re-invested in the stock market, thereby increasing your earnings. So you must focus on compounding your earnings, reinvesting your dividends, and achieving capital gain.

WHAT THE STOCK MARKET CAN DO FOR YOU:

By purchasing shares of the selected companies, you build your portfolio of stock investments. This portfolio is formed and selected on the basis of:

  • Company
  • Sector
  • Returns you are expecting
  • Risk capacity (how much can you invest in spite of market volatility)
  • Risk tolerance (how much market downturn and volatility can you sustain)
  • Payouts (dividends or bonus shares)
  • Any other considerations you may have according to your stock investment preferences

By purchasing the shares of a company, you become a shareholder of that company and are entitled to dividends and other payouts such as bonus or right shares issued by the said company, along with the advantage you can have of capital gain from increase in price of the shares.

If you have decided to invest in the stock market, then it is a decision well worth taking. Consider this that Pakistan Stock Exchange has performed better over the last several years, above and beyond other investment vehicles available in the country

Returns earned from the Stock Exchange as compared to other asset classes over the ten year period, Mar 2010 to Mar 2019:

KSE 100 Index stocks provided compounded annual returns of 15.13%* over the last 15 years Dec 2003 to Dec 2018. These figures compare fairly well with other avenues of investment in Pakistan.

The fact that the Pakistan Stock Exchange has given good returns historically, it is safe to say that investment in stocks in Pakistan Stock Exchange may well be worthwhile for the long run

HOW THE STOCK MARKET WORKS:

The stock market is a place where companies list themselves to make their shares available to a broad range of investors to purchase these shares. You, as an investor, have the option to choose from multiple stocks of different companies to buy in order to build your investment portfolio. The share prices of the shares listed on the Stock Exchange fluctuate according to the buy & sell transactions taking place.

WHY & HOW ARE SHARES OF COMPANIES LISTED:

PRIMARY AND SECONDARY MARKET:

The main purpose of the stock market is raising of capital through investment in shares of listed companies. Listed companies are those which issue shares in the stock market to raise capital. This is done either through an Initial Public Offering or Rights issue.

An IPO or Initial Public Offering (Primary market) is the issuance of shares by a company in the stock market in order that its shares are purchased by the general public. Once the IPO has taken place, the shares continue to be traded in the stock market (Secondary market), changing hands between buyers and sellers.

Another way a company raises its capital is by issuing right shares at a certain price to existing shareholders. A shareholder interested in purchasing the right shares may do so if he deems it fit.

PSX & ITS LISTED COMPANIES:

Pakistan Stock Exchange consists of a list of 546 companies in 35 different sectors or industries. The total Market Capitalisation (volume of outstanding shares times share price) was Rs 7.692 Tn as of Dec 31, 2018.

WHAT IS AN INDEX & WHAT IS ITS PURPOSE:

Index is a grouping of selected companies’ stocks according to certain financial parameters in order to measure the performance of a section of the stock market.

INDICES LISTED ON PSX:

There are seven Indices listed on PSX which are:

  • KSE 100 Index
  • KSE All Share Index
  • KSE 30 Index
  • PSX-KMI All Shares Index
  • KMI 30 Index
  • BKTI (Tradable Banks Index)
  • OGTI (Tradable Oil & Gas Index)

SHARIAH COMPLIANT INVESTMENTS:

For those investors who want to invest in Shariah compliant companies, there are listed companies on the Stock Exchange which are Shariah compliant. The PSX-KMI All Shares Index & the KMI 30 Index (KMI: KSE-Meezan Index) represent listed companies which are Shariah compliant. There are more than 200 companies listed on the PSX-KMI All Shares Index. The PSX-KMI All Shares Index & the KMI 30 Index were developed by PSX and Meezan Bank Limited. The listed companies’ Shariah compliance status is based on certain technical parameters and specifications as approved by a Shariah Board. In case of KMI 30 Index, it was approved by Shariah Supervisory Board of Meezan Bank Ltd., chaired by eminent Shariah scholar Justice (Retd.) Mufti Muhammad Taqi Usmani.

BASIC GUIDELINES FOR STOCK INVESTMENT

DEFINE YOUR INVESTMENT OBJECTIVES

A basic guideline is to understand what you really want from your stock investment

  • Do you want to invest for the short term (1-3 years), medium term (3-5 years) or for the long term (5 years or more)?
  • Do you want to invest for dividends or for capital gain or for both?
  • How much risk can you take in terms of market downturns?

These are the basic questions you must address before investing

Optimally, you may want to invest in stocks for the long term, in order to earn dividends (periodically, through dividend yielding stocks) and for capital growth (gain in share price) over a number of years

YOU SHOULD DIVERSIFY YOUR INVESTMENT

As mentioned earlier, it is important to have a diversified portfolio of investments. You can have a diversified portfolio of stocks in order to cushion the effects of market downturns & volatility and to keep your total investment relatively secure.

You can diversify your portfolio by

  • investing in different products listed on the Stock Exchange such as stocks of listed companies, T-bills and mutual funds
  • Investing in stocks on the basis of different industrial sectors or their market capitalisation
  • Investing in stocks based on shares that give dividends or shares that provide for sufficient capital gain or both
  • Investing in stocks with different risk/ return levels. Some providing greater returns while others providing less returns. At the same time, the risk level of former will be greater than that of the latter

EVALUATE YOUR RISK TOLERANCE AND CAPACITY LEVEL

You must evaluate how much risk you can take/ what is your risk tolerance level if the market takes a downturn.

  • If you are risk-averse, your investment portfolio of stocks should be passive. In this way, you will be assured of receiving a return at market risk level.
  • If you are less risk averse, your investment portfolio can be a combination of stocks which provide for returns at market risk level and above market risk level
  • If you are investing as an aggressive investor, you can invest in stocks which provide for higher returns reflective of higher than market risk

Having a balanced portfolio with different market risk levels of shares and their returns is usually a good combination to build a portfolio of stocks.

You must also understand your risk-taking capacity. How much are you able to invest in the stock market in the face of the downturns and volatility it is undergoing?

STOCK SELECTION – LOOK AT THE PARTICULARS OF LISTED COMPANIES’ STOCKS

In order to select the companies you want to invest into, you may want to look at:

  • The fundamentals and financials of the companies
  • The volume of activity in the stock market
  • The prevailing share price
  • The Price to Earning ratios (P/E)
  • The Earning per Share (EPS)
  • The indices in which the companies are listed (are they blue-chip KSE 100 Index companies?)
  • The annual payouts given by the companies
  • The industry/ sector performance of the companies

The above are some of the guidelines you may want to go by in order to select the companies you want to invest into.

WHEN TO ENTER OR EXIT THE STOCK MARKET

A lot of investors are usually confused when to enter the market and when to exit it. It is a safe proposition to enter the stock market when the Price to Earning ratios are low and the stock market is in an oversold position. Similiarly, it may be profitable to exit the market when the opposite conditions are true. But, as a general rule, it is not when you enter or exit the stock market, but how long you can stay in it.

OPEN YOUR BROKERAGE ACCOUNT:

After the selection of your brokerage firm, you will open a Brokerage Account. You must ensure that the said Account is opened in your name. You will be given a Client Identification Number or an Account Number against this account. Read the terms & conditions prescribed in the Account Opening Form and make sure that they match with the Standard Account Opening Form available on the PSX website.

Subsequently you will open a CDC Sub Account. The CDC Sub Account is the account through which you can actually trade in the stock market.

You are also encouraged to open a CDC Investor Account. This account is opened at the CDC, thereby adding to greater safety and individual custody of your shares.

You must make sure that you are assigned a Unique Identity Number (UIN). It is this number against which all your brokerage accounts and transactions will be recorded.

You will also need to deposit initial funds to purchase shares. Make sure that it is not a cash deposit.

PLACE YOUR ORDER & GET CONFIRMATION:

Once you have decided which companies’ shares to buy, you should place your orders through your stock-broker (or through the online application provided by your brokerage firm)

After placing the order and execution of the same, you should get a Trade Confirmation against your executed order.

SETTLEMENT OF TRANSACTIONS & STOCK MARKET ECOSYSTEM:

The shares purchased or sold are settled (payments made or received) through NCCPL (National Clearing Company of Pakistan Limited). The exchange of shares takes place through the CDC (Central Depository Company Limited). These two organisations and the brokerage firms/ TREC holders form the major part of the ecosystem of PSX.

ONLINE TRADING FACILITY:

Many brokerage firms offer Online Trading facility for its customers. This allows you as an investor to trade by yourself on the Stock Exchange through the online application or software.

BASIC TAXES & CHARGES:

There are several taxes and charges applicable on shares trading at PSX; the basic ones are listed as follows:

CGT (Capital Gains Tax) [Tax Return Filers: 15%, Tax Return Non-filers: 20%], Brokerage Commission [Varies amongst brokerage firms], CVT, IPF, SECP Fee etc.

SEQUENCE OF STEPS TO START INVESTING IN STOCKS:

  • Define your investment objectives.
  • Shortlist a number of registered and licensed brokerage firms based on your preferences.
  • Select a brokerage firm that fits your requirement.
  • Open a Brokerage Account, CDC Sub Account and a CDC Investor Account.
  • Deposit funds in your account through cheque.
  • Select the companies to invest into based on some or all of the parameters mentioned in the Basic Guidelines for Stock Investment, your preferences and discussing the same with your stock-broker. Thereby building your portfolio.
  • Start investing.

To help you safeguard your interest and to avoid complaints against the stock-broker, here are some easy tips:

BE WISE IN SELECTING YOUR BROKERAGE FIRM

  • Before selecting a brokerage firm, visit the offices of a few of them to observe their business practices. Try to gauge the reputation of the brokerage firm by talking to people you meet.
  • Make sure that the brokerage firm and its branch(es) is/ are registered with the Securities & Exchange Commission of Pakistan (SECP).
  • Get clear information on the commission rates and services provided and compare these with those of other brokers.

ACCOUNT OPENING

  • You would need to open a Brokerage Account with the brokerage firm. Subsequently, you would also need to open a CDC Sub Account/ CDC Investor Account. It is important that you open the account(s) in your name.
  • Thoroughly read and understand the terms and conditions of the form of the Brokerage Account. Strike out any inapplicable clause and sign the same. Get the deleted clauses signed by the brokerage firm as well.
  • A CDC Investor Account is more secure than a CDC Sub Account; hence more preferable. You stay in control of your securities because they can only move once you give a transaction order.

STAY WELL DOCUMENTED AT ALL TIMES

  • Obtain your Client Identification Number or Account Number as assigned by the brokerage firm.
  • Obtain your Universal Identification Number or UIN issued by the National Clearing Company of Pakistan Limited (NCCPL).
  • Instruct your stock-broker in writing to always enter the Client Identification Number & UIN in the trading system of the exchange while executing your trades. This would help in setting an audit trail oli trades made on your account.
  • Make sure that all receipts/ confirmations etc. are issued/ made in the name of the brokerage firm on their stationery bearing their name.
  • Obtain periodic statements from your brokerage firm to keep a check on your trade positions and account balances. Also get a periodic Sub-Account statement from the Central Depository Company to verify your securities and their movement.
  • Make sure to receive and check your Trade Confirmations against any stock trades executed, from your brokerage firm.

BE THOROUGH IN TRADING PRACTICES

  • Try to place your trade orders through one person rather than through several, in order to reduce chances of any misunderstanding.
  • Ensure that every time you buy shares, you get them transferred to your CDC Sub Account/ CDC Investor account on the settlement day only.
  • In case of any discrepancies, contact your stock-broker immediately. Don’t make simplistic assumptions or leave things to chance.

TAKE RESPONSIBILITY FOR INVESTMENT DECISIONS

  • Define your investment objectives well and be clear of your risk-tolerance threshold and risk-taking capacity.
  • Know your financial capacity and needs well. Stock prices keep falling and rising. Losing money in a stock trade is not your stock-broker’s responsibility. Stand by your decisions.
  • Avoid discretionary trading accounts whereby the brokerage firm is given the freedom to execute trades for you.

Pakistan Stock Exchange has embarked on a Financial Literacy Initiative to educate potential investors about investment basics, financial planning, and stock market investments. The Initiative seeks to educate the general public about defining their investment objectives, what to expect from the stock market, begin investing in the stock market, securing their brokerage account, dos & don’ts of investing in the stock market, and considerations while investing. The Initiative also seeks to educate the general public about the operational, strategic and regulatory developments taking place at PSX.

For any further information and queries regarding the Financial Literacy Initiative or for arrangement of Financial Literacy sessions for your organization/ institution, submit your query by clicking below.

Foreign persons and institutions as well as non-resident Pakistanis can invest in securities listed on Pakistan Stock Exchange. They can benefit from potential growth oppurtunities available through investing in the Exchange, . For non-resident Pakistanis, investing in PSX is specially an attractive venture as it will enable them to benefit from the competitive returns from the Pakistani Capital Market while being stakeholders in their homeland’s economy. For foreign investors, the benefits are equally attractive and competitive as Pakistan’s stock market has consistently performed better than several regional exchanges and other emerging markets over a period of several years.

Foreign investors are considered at par with the local investors at PSX and they can acquire 100% of the ownership in all companies except the restricted industries. There is no extra taxation for foreign investors and they are allowed repatriation of profit and investment with the approval of State Bank of Pakistan (SBP).

Foreign persons/ institutions/ non-resident Pakistanis can invest in PSX through Foreign Portfolio Investment (FPI) scheme. This scheme allows investors to invest into various instruments such as equities, government bonds, and TFCs. Under this scheme, it is mandatory for a foreign investor to open a Special Convertible Rupee Account (SCRA). SCRA allows for remittance of funds to & from the account for purchase and sale of securities by the foreign investor. There are two ways a foreign investor can invest on the Pakistan Stock Exchange:

  • A foreign investor can contact a brokerage firm directly who will facilitate their Brokerage Account/ CDC Sub-Account and their Special Convertible Rupee Account (SCRA). A foreign investor can also directly contact a scheduled bank for opening their SCRA but they will have to contact a brokerage firm anyway to invest in the Stock Market. Investors are well advised to also open a CDC Investor Account directly with the CDC for direct control, safe-keeping and custody of their shares
  • Another way a foreign investor, particularly Foreign Institutional Investors, can invest on PSX is by approaching Custodial Service Providers in Pakistan (either directly or through Global Custodians & International Broker Dealers). A Custodial Services Provider will facilitate opening of two accounts, Cash Account (Special Convertible Rupee Account-SCRA) and Securities Account. Both these accounts are linked and under the title of the Account Holder/ foreign investor. SCRA allows for remittance of funds while the Securities Account is credited with securities purchased and debited with securities sold. This account is linked to the CDC Sub-Account which enables a foreign investor to transact on PSX via his stock-broker who executes the trades on the investor’s behalf. A FII will need to contact a brokerage firm directly.

PSX has a Centralised Customers Protection Compensation Fund (CCPF), the sole mandate of which is to compensate, either fully or partially, customers of a defaulting broker as per Chapter 24 of PSX Regulations. A Base Minimum Capital (BMC) is required to be deposited and maintained on the basis of Assets Under Custody by respective brokers as per Chapter 19 of PSX Regulations.

A customer wanting to lodge a complaint against a defaulting stock-broker in respect of claiming funds can do so by contacting the Regulatory Affairs Division (RAD) of Pakistan Stock Exchange. Once a stock-broker defaults, the ensuing process is as follows:

  • A default committee is constituted by RAD comprising industry experts, senior management personnel of PSX and TREC Holders not exceeding one-third of total such committee members.
  • A notice of default of a stock-broker is issued on PSX website informing the public and market participants including other securities market institutions about the declaration of a broker as a defaulter.
  • A public notice is issued on the same day on the PSX website inviting the public to file claims against the defaulted stock-broker. Such a notice is published in atleast two widely circulated newspapers of Pakistan in English & Urdu languages.
  • To ensure detailed and independent assessment, an audit firm is engaged to verify the genuineness of claims of the aggrieved parties.
  • The approved claims are settled from the funds made available from the disposal of assets of the defaulted stock-broker available with PSX under BMC as mentioned above. The claims still remaining unsatisfied are then paid from CCPF in the manner provided in Chapter 24 of PSX Regulations.