Why Investors Not Investing in the Stock Market by AsadMazhar

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									                                                   Why investors not investing in the Stock Markets
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INSTITUTE OF BUSINESS AND TECHNOLOGY


    Why Investors Not Investing in the Stock
                   Market

                          Prepared By

                         Noman Jamil
                          BM/25029


              Course Code :                         MKT-606

             MBA (Banking and Finance)



             FACULTY OF
    MANAGEMENT AND SOCIAL SCIENCES

                           FALL- 2010


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                  TABLE OF CONTENTS
                                                                                     Page No.

ACKNOWLEDGMENT……………………………………………………… 01

ABSTRACT……………………………………………………………………. 02

CHAPTER NO.1 INTRODUCTION

          1.1    Introduction……………………………………………….. 04
          1.2    Purpose of Study ………………………………………… 05
          1.3    Research Objective ………………………………………06
          1.4    Research Methodology ………………….……………… 06

CHAPTER NO. 2 LITERATURE REVIEW
          2.1    Pakistan and Gulf Economist ……………………………08
          2.2    Investment opportunities in Pakistan ………………….. 08
          2.3    Where to invest your money …….……………………….09
          2.4    Ten commandments ……………….……………………. 16
          2.5    Stock screening basics…………….……………………...18
          2.6    Einstein‘s rule of 72 ……………….………………………19
          2.7    Stocks or Bonds …………………….……………………. 19
          2.8    Ways for individual to invest in stocks …………..……... 20


CHAPTER NO.3 FINANCIAL SYSTEM
          3.1     The Financial System ………………………………… 22
          3.2     Functions of Financial System ……………………….. 23
          3.3     Importance of Financial System …………………….. 25

CHAPTER NO.4 STOCK MARKET & INVESTMENT
          4.1     Stock Markets in Pakistan …...…..…….……………... 27
          4.2     Sector wise Investment…… …………….………...…. 36
          4.3     Present and Future Prospects ……..…….…………... 41


CHAPTER NO.5 PROBLEMS OF PAKISTAN’S STOCK MARKET
          5.1     Economical ……….……………………….……………. 44
          5.2     Political……………………………………. …………….. 45
          5.3     Tax Issues ……….………………………………………. 46




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CHAPTER NO. 6 REASEARCH ANALYSIS
         6.1      Analysis and Interpretation of Data ………………..                           48




CHAPTER NO. 5 CONCLUSION AND RECOMMENDATIONS
.
          7.1      Conclusion ……………………………………………… 65
          7.2      Recommendations …………………..………….…….. 66


BIBLIOGRAPHY …………………………………………………….............. 67


ANNEXURE




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                           ACKNOWLEDGMENT



At the completion of my research project I would like to thank God Almighty for
giving me the power, energy and guidance to do this research study.


I would then like to thank my resource person, Mr. Dr. NOOR MEMON for giving
me this opportunity to carry out this project. I would like to thank him for all his
help and guidance.


Last but not the least, I would like to thank my family and friends for being there
for me whenever I needed then for bearing with me all the way through.




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             INSTITUTE OF BUSINESS AND
                            TECHNOLOGY
   ABSTRACT SUBMITTED BY:                    Noman Jamil



   DISCIPLINE:                               MBA (Banking & Finance)



   TITLE OF PROJECT REPORT:                  Why investors not Investing in the
                                             Stock Markets

   MONTH OF SUBMISSION:                       November, 2010


  NAME OF PROJECT SUPERVISOR: Dr. Noor Ahmed Memon


                                    ABSTRACT

We are led to believe that the best place to invest our money is in the stock
market. Low barriers to entry, low barriers to exist, plenty of information, high
probability of success in the long run and a lot of success stories. We also hear
some of the horror stories of people who day traded tech stocks in the early
2000s, gamblers who lost it all on penny stocks. Most of the people in Pakistan
do not invest in stock markets cause of fear of loss and the economical condition
of country. political uncertainty is another factor which s un negligible. The
thinking involved before making a decision to invest in stocks includes how to
actually do it and in what stocks to invest. First someone has to decide whether
he is willing to take on some risk and place his money on a stock that he hopes
will increase in value. Due diligence by investigation of the company along with a
study of it's history are critical factors. No one should just take a chance and
invest in a company simply because it has been in business a long time. Thought
is also required regarding how much of a role his stock investments will play


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within his entire investment portfolio. Also, if he is a first-time investor, he will
have to register with a brokerage firm before buying stocks or making trades.

Investing in the stock market has one overriding goal: to make money. A typical
reason why people will choose to invest in stocks rather than other avenues can
be because he likes a specific industry or company. . Excitement and thrill are
factors as well, with anticipation of hitting it big by owning a piece of a company
he likes and having the opportunity to flourish with it.

Stocks provide but one avenue of investing. There are corporate and
government bonds available, which are considered less risky than stocks but
typically offer smaller returns, that are commonly found in portfolios. Investing in
commodities such as gold or silver is yet another avenue, as is real estate, while
some choose to invest in themselves through self-employment. Many investors
have a diversified portfolio as a protection, so that if one form of investment takes
a downward turn, there is still opportunity that the other instruments will be doing
well and dampen the loss. Stocks are considered to be one of the most risky
investments but also offer a chance to reap large rewards as the continuation of
this opportunity remains prevalent.




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                             01. INTRODUCTION
1.1 Introduction:
Stock exchange is of the powerful financial institutes. By 1995, over 60
developing countries had established although these varied considerable in size
in terms of number of companies listed and market capitalization.


Stock market not only helps investors their money but also provides their
significant funds to different companies. Whenever a company needs funds for
investment in its operation/business, it either raises debts/loans or invites
equity/capital from the investors. When funds are raised through equity/capital,
investors in acknowledgement of the portion of their investment are made the
shareholder of the company and issued ―share certificates‖ as a proof of their
ownership in the company. Stock ownership has provided the greatest
investment opportunity to the largest number of people over time. Now whenever
a certain shareholder of the company wishes to sell all or part of her/his holdings,
he or she can only do so through the stock market. Likewise, anyone willing to
buy the shares of the company can do in the stock market.


Other then stock market there are different financial institute, which provide fund
to company like banks or corporate bonds. Similarly, investors are investing in
different financial institute/schemes like bonds, saving certificates, banks.




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1.2     Purpose of Research:


There is a lot of mystery in the minds of people, who are new to working with the
stock market. There is the fear and concern of possibly losing hard earned
money, coupled with the wonder and excitement of building large profits.


Even though, people do invest in different market/schemes. They find the specific
market/scheme according to their needs and put their earned money there. It is
an observation that some of people, who are potential investors or who are
investing in any form, are not trading in stock market. This research is specially
focused on finding factors that are stopping any investor to invest in stock
market.


It is important to know that one can start buying stock with just few rupees a
month. As one start with a small amount, a lot of experience is not required.
Person knowledge and experience will increase as the amount of money you
invest grows. Above all stock provide highest return on investment with greater
risk.


Frequent substantial political, economical and social changes make of an
adventurous nature. Due to the adventurous nature of these securities, returns
can sometimes be handsome, making them attractive to investors willing to
tolerate risk. However, the downside danger can be substantial.




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1.3    Researched Objectives:


Following are the objectives of this research project.


1. To find out the awareness of stock market among the people.
2. To identify why any investor does not invest in stock market.
3. The factor which are affecting investor‘s decision.
4. To determine what investors want out of his money that he/she invested.




1.4    Research Methodology:


In any survey, the methodology employed is crucially important, as the local
people are reluctant to reveal any pertinent information to the surveyor. To
overcome this problem a unique method of investigation was required. The
required information had to be gathered in a way, which meets all the objective
requirements with a high degree of accuracy.


Measurement instrument that is used in research is questionnaire. A
questionnaire is a list of planned, written question related to a particular topic,
with space provided for indicating the response to each question, intended for
submission to a person for reply. Questionnaire contains 24 relevant questions.




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1.5      Methods in Data Collection:


The most important aspect of any trade survey is the accuracy of information. To
meet the requirements of the method of data collection used involved formal
questionnaire.     The     researchers   posed        themselves           as    young        aspiring
businessmen willing to know why investors are not investing in stock market.
Only those people, who seem to have enough financial and education capability
to invest, were given questionnaire. If questionnaire is given to the individual who
later ineligible to invest, his filled questionnaire is discard from overall survey and
results.


Sixty questionnaires were distributed out of that only 72 responded. A Survey
research where information was collected directly from respondent at the
following geographically segmented location:


      1. Clifton
      2. Defence
      3. KDA
      4. Tariq road & P.E.C.H.S
      5. North Nazimabad
      6. Gulshan-e-Iqbal




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                         02. LITERATURE REVIEW

Local Literature:




2.1 Pakistan and Gulf Economist:
―Equities offer an incredibly high yield at present. To support their argument say
that Board meetings of most of the companies are scheduled in December and a
large number of companies may declare very attractive dividend. They say that
last nearly 375 companies declared dividend amounting rupees 32 billion and
most of them announce similar result for the 2006, at least‖


―Investment in mutual funds may be the best for individuals. Since mutual funds
have a diversified investment portfolio, selection of scrip is based on economic
fundamentals and managed; probability of substantial losses is relative low.‖


―Analysts often suggest that investors must look towards equities market.‖
Cover story:‘ Where to invest your money‘, 22nd October, 2006, page16


2.2 Investment opportunities in Pakistan:
A seminar organized by Harvest Group By Faraz Siddiqui


Pakistan is among the developing economies of world with emerging markets,
stock market is one of them. Emerging stock and forex markets in developing
countries have become an important and highly accepted investment tools. Due
to its significant Harvest Group has organized a seminar on ―Investment
Opportunities in Pakistan‖.


Presenting the introduction of Harvest Group, Mr.Ziaullah, Marketing Manager
Harvest Group said, Harvest Group is an international entity with specialized
services of Forex and securities trading. It was established in 1992 and in a very


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short of time it becomes a worldwide Forex and security brokerage house of
international standard. In Pakistan HG operates two partnerships Harvest Top
worth International (HTW) and Harvest Smartrend Securities (Pvt) Limited (HSS).


Bhatti further said, HTW is the Forex Brokerage Arm of Harvest Group which is
pioneer of Forex Brokerage in Pakistan with the largest setup. While HSS is a
stock brokerage house which offers a wide range of services for the investments
in the stock markets. He further said, HSS is the only stock brokerage house in
Pakistan Stock market information through Reuters Systems. Enlightening the
insights of exciting world of stocks, Humaira Jamil, Research Analyst at Harvest
Group Lahore, said, Pakistan has sample investment opportunities being an
emerging market. All the stocks markets in Pakistan are emerged markets. She
further said, stock business is highly regulated industry which is managed first by
stock exchange itself, then Central Depository System and finally Securities
Exchange Commission of Pakistan. From March 2000 onwards, KSE has been
facing huge losses but now market is slowly recovering and coming back on the
track. She further said, in depth analysis of the market behaviour reflects that
market has strength to sustain higher level with the years to come.


2.3 Where to Invest Your Money?
Attractive investment opportunities a must for boosting savings rate          By shbbir h. Kazmi
Oct 30- Nov 05, 2000


Pakistan needs large scale investment for acceleration the economic growth rate.
The objective cannot be achieved without boosting investment in productive
activities. T quantum of investment is largely dependent on the savings rate that
is driven by the philosophy ‗incentive for savings‘. The declining returns on
National Savings Schemes (NSS) and mark-up being paid by financial
institutions and high rate of inflation have become serious impediments for
boosting savings rate.



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Historically, people used to keep their savings with commercial banks either as
time deposits or in their savings accounts. Investments in NSS products,
currencies, gold, real estate and commodities were other available options.
However, with the recent declining trend in return on bank deposits and NSS
products, people are in desperate search for other alternatives. The quest is also
supported by the Supreme Court judgment regarding abolishing RIBA from the
economy. Even much earlier, than the day this judgment was announced, a large
number of people were in search if interest free financial products. There was a
pressure on financial institutions to come up with RIBA free products. Though the
initiative was taken as back as early eighties, the lack of commitment, uncertainty
and dearth of expertise did not allow the financial institutions in the country to
come up with financial products truly based on Islamic injunctions.


Investment in NSS products, despite yielding lower return, is still considered
most secure because of being backed by the government. The investors in these
products mainly comprise of widows, old people and those who are interested in
getting fixed and/or regular income. However, they feel a pinch now due to
reduction in rate of return.


Bank Deposits:   Domestic and foreign commercial banks, put together, have an
elaborate network of branches throughout the country. Almost each bank has its
own niche market and has its own strength and weakness. Deposits with banks
are perceived secure. This perception has helped the banks in mobilizing low
cost funds and earn high yield by investing the funds in T-Bills/government
securities. In last couple of years the scenario has changed to a large extent.
With the growing competition among the banks in resource mobilization,
reduction in T-Bills yield, foreign currency deposits being expensive and low
demand for credit, the return on PLS account and time deposits are on a
constant decline and do not commensurate with the with the rate of inflation in
the country. However, as a result of the recovery campaign of November 1999
large scale restructuring of loans and change in the rules regarding provisions


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against doubtful loans, commercial banks are expected to pay better return on
deposits. To maintain deposits level almost every bank is trying to come up with
innovative financial products to suit the needs of various groups. Now financial
institutions offer various products which have the advantage of daily calculation
of mark-up to advance profit payment. This clearly indicates that these
institutions have realized the need of various income groups and have started
offering products to suit the needs of each group. Thanks to growing competition
foe resources mobilization that has also forced the banks to optimize operating
costs to enable themselves to offer competitive return. While the return on
deposits may be comparable, the inflow of deposits is dependent on a number of
other factors. These include: branch network, quality of service and other fringe
benefits. These factors often playa decisive role in selecting a bank or branch
when one has to make a selection.


After the freezing of foreign currency accounts in May 1998, the preference for
dollar deposits has come down considerably. Even the banks discourage
maintaining such accounts, at times, due to higher exchange risk cover. Some of
banking sector analysts says that it was not the rate of return on deposits but the
probability of gains due to persistent rupee depreciation that encouraged people
to accumulate dollars. Yet another reason was preference of dollar deposits as
the most acceptable collateral by banks. The recent dollar buying spell was also
due to expectation of massive devaluation of rupee. The buying pressure led to
exchange rate volatility which further intensified the lust for accumulation of
dollars. However the volatility has reduced to a large extent and the difference
between kerb and official rates is expected to come down further once the inflow
from multilateral resumes.


Capital Market:   As the returns are going down, it has become imperative that
people should not look towards bank deposits/NSS only. Mutual funds, equities
and debt instruments, currencies, real estate and gold should also be considered
for investment to maintain a diversified investment portfolio to earn higher return.


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Each option offers opportunities and has pitfalls. While services of investment
consultants may be available in the country, the ultimate responsibility of making
prudent decision lies with the investor. According to ARIF HABIB, Chairman,
Karachi Stock Exchange, with the increasing number of listed companies and
large capital base corporations the daily trading volume has increased manifold
over the years. It is mainly due to better market information, brokerage house
opening more and more branch offices and printing exhaustive reports about the
performance of listed companies. It is also because of improved infrastructure
and market efficiency. ARIF said that despite a negative perception about
equities market, performance of various sectors is worth mentioning. Net assets
values of a large number of companies have improved over the years. Still, many
scripts are selling at a discount and prices are very attractive. As the signs of
economic revival have started appearing there are prospects for better dividend
yield.


Over the last couple of year‘s number of companies declaring cash dividend is on
an increase. To make the equities market more efficient and attractive the
Securities and Exchange Commission of Pakistan (SECP) is trying hard to play
its due role. This has improved corporate governance, encouraged greater
disclosure and also helped in restoring confidence of investors. However,
according to ARIF, a lot has to be done to improve market efficiency. Creation of
Central Depository, KATS, display of real time information and monitoring of
brokers behavior have further consolidated the confidence of investors which will
lead to large investment in equities and debt instruments.


Debt instruments, mainly Term Finance Certificates (TFGS), have been floated.
They offer the advantage of fixed income. Individual investors are still reluctant to
invest TFGS due to support from secondary market. Mostly institutional investors
invest in these certificates. Globally the market is large in size as compared to
equities market, but it is the other way round in Pakistan.



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One of the reasons for lack of issuers is compulsory rating by an independent
credit rating agency. However some analysts strongly believe that disclosure is
the main issue. In Pakistan many listed companies prefer to publish the bare
minimum information in annual reports and would never like to make the
maximum disclosure. Such companies prefer to borrow from banks rather than
mobilizing resources from capital market. Another issue is credible track record
for credit rating. While there is no obligation for paying dividend to shareholders,
no issuer can avoid paying agreed return to TFC holders. According to DR.
AMJAD, Head of Assets Management, National Investment Trust, the analysis of
performance of bank deposits, gold, dollar, Defence Savings Certificates and
stock market for the last 25 years indicates the highest growth in investment in
stocks. However, he was skeptical that an individual who did not have thorough
knowledge of stock market might loose his money. In his opinion interest in
investment in stock is driven by the attitude towards risk, age of a person and
time horizon. Still the key factor affecting the return on investment is the
diversification of the portfolio. Dilating his point, he said that investment in open-
end mutual funds may be the best for individuals. The sale and repurchase price,
based on net assets value, is calculated on daily basis. This provides an
opportunity to investors to make capital gains besides earning regular dividend
income. Since an open-end fund is diversified, selection of Scripps is strictly on
the basis of economic fundamentals and it is also managed by professionals, the
probability of substantial losses is minimized.


Dr. Amjad has a point of caution for investors. In his opinion, the time horizon for
investors in equities market should be about three years. This period allows an
investor to earn a reasonable dividend as well as make capital gains. An analysis
of local equities market may indicate some spikes during three to six months
period. However, over a longer period the adverse impact of such surges is
minimized. He also suggested that old persons, who need regular and
guaranteed income, should not invest more than 30 percent to their total portfolio
in equities market and should invest preferable in fixed income securities. At


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present there are two open-end mutual funds in Pakistan, i.e. National
Investment Trust (NIT) and Unit Trust of Pakistan (UTP). As against this there
are 39 closed-end listed mutual funds. Out of these the largest number pertains
to the funds managed by the investment Corporation of Pakistan (ICP) and
remaining are managed by the private sector. An analysis of mutual funds
managed by ICP shows that at present all these funds are quoted/traded when
with net asset value. Another observation is that quoted price per share, in case
of a number of funds, is even below par value. This indicates a lack to interest of
investors in closed-end mutual funds.


According to HABIB-UR-REHMAN, Executive, ABAMCO, ―Investment in an
open-end fund is most suitable for individuals. If one looks at the number of
mutual funds operating globally it is amazing. For example, the first mutual fund,
Unit Trust of India, was established in India in 1964. The size of total mutual
funds in India at estimated over five trillion Indian rupees‖. Apparently, it looks
that individuals know very little about the advantages of investing in mutual funds
in Pakistan that was also confirmed by REHMAN. The largest investments in
mutual funds in Pakistan, at present, pertain to institutional investors. Whereas in
India mutual funds have grown in number and size mainly due to the Skeen
interest of individual investors who have realized the advantage on investing in
mutual funds. If one looks at the performance of mutual funds in Pakistan, it
generally reflects the performance of listed companies. The reason being that
these funds have invested mainly in equities. However, BSJS Balanced Funds
stands distinguished. As the name reflects, BSJS has made investment in a
diversified and balanced portfolio. It has made investment in equities, debt
instruments and money market, etc. Since its established it has been paying
regular dividend to its shareholders. As compared to this all hose funds that have
total investment in equities have been experiencing performance full of surges.


Other Options:   A smaller segment of investors, which has large amount at its
disposal and also have strong holding power, have been investing in real estate,


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gold bars and commodities. To make an investment in these options one needs
to have thorough knowledge of the trade. At present prices of real estate are
down a cycling behavior. A factor responsible for this is said to be the on going
process of documentation. In the recent past there used to be a huge difference
between the markets price and the price used for registration purpose. Other
reasons for lack of interest in real estate are: constant increase in the prices of
construction materials, delays in handing over of the possession by the builders
and poor low and order situation, particularly in Karachi. The last factor has
adversely affected the prices of houses in almost all the localities. It is due to the
preference for living in apartments. This shift towards apartments is on a
constant    increase.    However,       living      in      apartment           has       its     own
disadvantages/hazards. The apartments which ensure proper maintenance,
security, uninterrupted supply of water and stand-by electricity system have been
registering constant increase in market value of the property.


Pakistan needs grooming of the bread of investment advisors. The service of
equities analysts/brokers and real estate are available. However, the country now
needs investment advisors who can help in developing a diversified portfolio to
ensure regular return. While some RIBA free products are being offered foe
investment by the financial institutions, there is still a need for improved products.
These needs: greater commitment of the financial institutions, efforts to develop
innovative product and to commence extensive promotional campaigns.




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2.4 Ten Commandments:
Before you invest in any stock. Continuously review and disinvest if any
commandment gets violated.


Ten Commandments


   1. Sector allocation: You shall allocate sector weightages that are different
      from sensex lest you should not achieve the objective of limiting risk
      requires you not to go gung-ho on some sectors as their fortunes change
      without taking your permission.
   2. Liquid and focused portfolio: You shall limit your portfolio to 10 and 10
      stocks. All successful investors agree that an unwieldy portfolio is a sure
      recipe foe below average returns. As all Homo sapiens can err, you shall
      invest in stocks where exit is easy i.e. stocks with a minimum market
      capitalization (we set the limit at Rupees 10mn) and have good liquidity
      (average BSE turnover should exceed Rupees 10mn per day in the last 3
      months).
   3. Avoid tips: You shall not envy your friends getting rich if his/her sticks
      appear to be rising faster than yours. You should not forget that can fall
      even faster. You shall fall in the trap of getting excited by every tip even if
      it looks sexy by its performance in the last few days. None of your
      investment decisions should violate any of the 10 commandments.
   4. Leader only: You shall only buy companies that are leading in their
      respective industries i.e. they should be in top 5 in the respective Indian
      industry. An exception can be made only if there is a big turnaround or
      restructuring story.
   5. Management quality: You shall not buy companies run by managements that
      have a track record of incessant equity dilution, talking up unrelated
      projects, misleading investors by miscommunication or no proven track
      record. The only exception you can make if you have a reliable report that
      the management is changing.


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   6. Positive cash flow: You shall invest only in companies that are expected to
      have a positive cash flow in the next 3 to 5 years. In other words, the
      companies that will have operating cash flows higher than their
      requirements of cash for capital expenditure and investments on merit
      investments.
   7. Valuation: You shall not be carried away by P/E multiples. That does not
      mean you shall ignore P/Es but requires you to evaluate future P/Es
      keeping in mind P/Es of the peer companies and relatives growth
      prospects. Also the investment candidates should expect to have a
      favorable change in their Eva‘s (economic value added). That is EVA in
      the next 2-3 years is expected to be substantially better than the same in
      the recent past.
   8. Industry position: You shall evaluate companies as regards to their
      competitive position on the Porter Model which considers parameters like
      bargaining power of buyers and suppliers, threat of substitution,
      competition and changes in industry structure. You shall find most
      companies with regulated earnings as out of your investments arena.
   9. Global competitiveness: You shall invest in companies that are susceptible
      to unavailability with competition from imports and global competition. You
      shall presume that import duty structure will be aligned to global norms in
      making this evaluation. A corollary is that you shall prefer companies with
      cost advantage, high operating efficiency and superior quality products.
   10. Shareholder friendly: You shall invest in companies that have track record of
      treating minority or non promoter like step children. Such companies
      include the once that hive off profitable for a poor consideration or diverts
      funds to other unknown group companies etc. Other things being equal
      prefer companies that are shareholder friendly in terms of dividend, bonus,
      transparency, disclosures in annual reports etc.




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Foreign Literature:


2.5 Stock Screening Basics:
Stock screening is the process of finding companies that meet certain financial
criteria. Using a screener is equity easy. First you answer a series of question:
Do you like large-cap small- cap? Are you looking for stock prices at all-time
highs, or companies with stocks that have fallen in price? What range for the P/E
ratio is acceptable? The good screeners will allow you to search on just about
any merit you wish.


Screening focuses on the measurable factors affecting a stock‘s price, this is
referred to as quantitative analysis. In other words, screening focuses o tangible
variables such as market capitalization, revenue, volatility, profit margins as well
as performance ratios such as the price/earning ratio or debt/equity ratio. For
example, for obvious reasons you can use a screener to search for a company
that makes ―the best products‖.




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.




2.6 “Einstein’s Rule of 72”
By Dr. J. Michael Hall   (Doctors in Finance, Investment & Estate Planning), Mesa
(Phoenix, Scottsdale, Tempe Area) Arizona.


Einstein‘s ―RULE of 72‖ gives us an easy figure how long it takes to double our
money! Simply divide the rate of growth your money is earning into 72.


Example:


If you have $ 10,000 in a savings account at a bank, earning you 2.5%, Divide
2.5% into 72=58.8 years money (This shows why Einstein said, ―If people really
understood the ―Rule of 72‖ they would never put their money in Banks!) If you
have $ 10,000 invested in an investment that return 18% Divided 18% into 72=4
years to double your money! Knowing this, why would you put money in a bank!
It‘s probably the place to put it. They seldom pay over 3-4%, even in C.D.‘s.
There are MUCH better places to put your money, as you‘ll soon see.


2.7 Stocks or bonds?


1.   Are bonds subject to the same market fluctuation as sticks?           Stocks are subject to
two kinds of market fluctuations: one, fluctuation in earnings, and two, fluctuation
in interest rates, i.e. fluctuation in the value of money. Bond, on the other hand
(at least, T-bonds), are subject only to fluctuations in interest rates. However,
there are empirical relationships between the level of business activity and
interest rates, which vary other the business cycle. Hence, T-bonds will also be
indirectly affected by fluctuation in corporate earnings, through their effect on
interest rates.



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2.   If you are investing for just a few years, do you invest in stocks or bonds?                 If you
are investing for a few years, bonds provide much safety. In addition, it is
possible to choose bonds of the appropriate maturity, so that interest rate is
minimized. If you want to minimize down-side risk, then you should invest much
more in bonds than in stocks.


3.   I am in my thirties; do I invest in stocks or bonds? Why?              The average return on
bonds, particularly T-bonds is very low, compared to that on US equities. Long-
term T-bonds have yielded an average of 5.35% from 1926 to 1993, while the
average return on the Standard and Poor‘s Composite Index over the same
period was 12.31%. Inflation over the same period was 3.23% on an average.
This means that long-term bonds barely provided a 2% over inflation, while
equities provided about 9% over inflation. Although the year to year variation in
returns is much higher for bonds than for stocks, the variation returns over 20-
years periods is actually smaller for stocks than bonds. Hence, anybody investing
for the long-run should probably invest a sizeable portion of their wealth in
stocks, provided that the portfolio is well diversified.


2.8 Ways for Individuals to Invest in Stocks:


The best way for individuals to invest in stocks:     Mutual funds are probably the best
bet for most people because funds offer
● Diversification
● Low-cost, professional management
● Low-cost transactions


One stock you shouldn’t invest in:   Don‘t put too much money in your employer‘s
stock 401(k) and Employee Stock Ownership Plan (ESOP) might give you a
good deal on employer‘s stock
Consider placing some money in employer‘s stock, but don‘t invest more than 10
percent of your equity holdings in your company‘s stock if your company hits


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hard times, you can get hit with double whammy. The stock price falls, you lose
your job
If your company offers you stock options as an incentive with little or no cost to
you, take them But invest the rest of your portfolio in other assets so that it your
company went bankrupt, you‘d still be OK


The best way to minimize your risk:   Invest in a broadly diversified portfolio Diversify
across asset classes:


● Stocks
● Bonds
● Real estate
Diversify within asset classes
● Large company stock
● Small company stocks
● Foreign stocks
● Dollars cost average
● Bond laddering


Example of how diversifications reduce your risk without reducing your return
Studies show that typical returns for individual stock ranges between -40 to +60
percent per year So don‘t be impresses if a broker tells you about a stock that
she picked went up 50 percent It happens all the time Returns for the market as
a whole range between -7 to +27 percent per year By investing in a broad-based
mutual fund, you enjoy the same average gain, over time, as if you invested in a
few individual stocks, but with less volatility




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                          03. FINANCIAL SYSTEM


3.1 The Financial System


Such systems are very important in the economy for they play a critical role in
igniting ―industrialization‖ by facilitating the mobilization of capital for ―immense
works.‖ Well-functioning financial institutions spur technological innovation by
identifying and funding those entrepreneurs with the best chances of successfully
implementing innovative products and production processes. It has been said
that ―where enterprise leads finance follows.‖ According to this view, economic
development creates demands for particular types of financial arrangements, and
the financial system responds automatically to these demands. There is a belief
that the development of financial markets and institutions is a critical and
inextricable part of the growth process. There is evidence that the level of
financial development is a good predictor of future rates of economic growth,
capital accumulation, and technological change. Financial market development
—or the lack thereof—crucially affects the speed and pattern of economic
development.




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3.2 The Functions of the Financial System


The costs of acquiring information and making transactions create incentives for
the emergence of financial markets and institutions. Put differently, state-
contingent claim framework with no information or transaction costs, there is no
need for a financial system that expends resources researching projects,
scrutinizing managers, or designing arrangements to ease risk management and
facilitate transactions. Different types and combinations of information and
transaction costs motivate distinct financial contracts, markets, and institutions.


In arising to ameliorate transaction and information costs, financial systems serve
one primary function: they facilitate the allocation of resources, across space and
time, in an uncertain environment.


The primary functions of a financial system can be divided into five basic
functions:
                facilitate the trading, hedging, diversifying, and pooling of risk,
                allocate resources,
                monitor managers and exert corporate control,
                mobilize savings, and
                Facilitate the exchange of goods and services.




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Fig 3.1 - Theoretical Approach to Finance and Growth

                            Market Frictions
                            - Information costs
                            - Transaction costs



                         Financial markets and
                            Intermediaries




                           Financial Functions
                              - Mobilize savings
                             - Allocate Resources
                          - Extent corporate control
                            - Facilitate risk mgmt
                           - Ease trading of goods,
                                services ,contracts




                           Channels to growth
                           - Capital accumulation
                             - Tech. innovation




                                 Growth




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3.3 Importance of Financial Markets


Credit Surplus Units (CSUs) may invest indirectly by identifying Credit Deficit
Units (CDUs) that have identified profitable investments, but no resources to
exploit them. The CDUs agree to borrow savings of CSUs by issuing financial
claims. A financial claim is a contract or agreement between two parties, in which
the borrowing party agrees to transmit income to the saver in order to obtain
savings immediately.


Financial markets facilitate the savings and investment process by making it
more efficient. Markets provide mechanisms to reduce the time and effort for
CSUs to search CDUs. They provide much needed information on prices and
volume of transactions. In that respect, financial markets provide information
about the income that can be expected on different financial claims and their
current prices.


Fig 3.2 - Flows of Funds through Financial System



                                       Indirect Finance


                         Funds              Financial
                                         Intermediaries

                                                F                                          Funds
                                                U
                                                N
                                                D
                                                S
  Lender-Savers                                                               Borrowers-Spenders
     1. House Holds                                                              1. House Holds
     2. Business Firms                      Financial                            2. Business Firms
     3. Governments          Funds          Markets            Funds             3. Governments
     4. Foreigners                                                               4. Foreigners

                                        Direct Finance




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The importance of financial markets is also apparent when considering the
development of a non-market economy. This economy has no mechanism for
determining the value of goods and services. These values are determined by
central government bureaucracies. The result of foregoing markets that provide
information on the supply-and-demand interaction for goods and services is the
mis-pricing of most goods and services. This leads to waste. Many goods are
produced even thought here is no market for t hem. Other goods are produced
using very costly materials, when less expensive substitutes could be used. This
also leads to the well-known shortages. The price is low, but goods are not
available. Creating a market economy in goods and financial claims is a solution
to many of these problems.


Thus to summarize it can be said that the financial markets are important for a
few of the following reasons:
             To provide information on past and present prices and trading
             volume
             To reduce search costs by bringing buyers and sellers together
             To provide for standardization of contracts
             To reduce (transfer) credit risks for buyers and sellers to reduce
             information asymmetry.




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                 04. STOCK MARKET & INVESTMENT


4.1 Pakistan’s Stock Markets


Stock market in Pakistan has witnessed extraordinary volatility during the year.
The Karachi Stock Exchange (KSE) witnessed an accelerated rise during the
year until March 15, 2005. The KSE-100 index rose from 5210 in July 2004 to
peak at 10,303 on March 15, 2005 – an increase of 5093 points or 98 percent.
That rose in index continue till the mid of year 2007 and index cross the limit of
16000. but in last of 2007 it gradually declined and 2008 it reached to less than
5000 points. Government took some supportive measures as a result it again
start to rise and today market is trading on more than 11,000 points. The
accelerated rise was witnessed since January 2005 and until March 15, 2005
when index rose by 65 percent in a short period of 2.5 months. Most of these
increases were contributed by OGDC, PTCL, PSO, POL and NBP, of which three
are on privatization list (OGDC, PTCL and PSO) and their share prices jumped
upward mainly on report of good buying interest from foreign strategic buyers.
There has been a buying interest in NBP on account of good profitability.


The stock market turned bearish since March 16, 2005 as the KSE 100 index
dropped to as low as 6939 on April 12, 2005 from its peak of 10303 – showing a
decline of 3364 points or 32.7 percent. Such a sharp rise in index and a
subsequent steep decline represented abnormal and unhealthy movements in
the equity market. While the five scripts listed above caused unprecedented
boom, the same scripts largely became the cause for the sharp down turn. There
are divergent views of the market players and outsiders on what caused
abnormal behavior of the equity market.




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Some of the reasons responsible for the abnormal behavior of the equity markets
include the following:
   1. Delay in the privatization of government owned companies
   2. Withdrawal of funds by financiers
   3. Excessive buy positions by several brokers in the future market who were
       not able to get an exit opportunity due to the continuous decline in the
       market
   4. Sellers in the March future contract were carrying hedged position from
       ready market
   5. Seller decided not to square up their positions in the March futures
       contract
   6. Downward circuit breakers blocked the opportunity of exit from the market.




Islamabad Stock Exchange:   The Islamabad Stock Exchange (ISE) was incorporated
as a guarantee limited Company on 25th October, 1989 in Islamabad Capital
territory of Pakistan with the main object of setting up of a trading and settlement
infrastructure, information system, skilled resources, accessibility and a fair and
orderly market place that ranks with the best in the world. The purpose for
establishment of the stock exchange in Islamabad was to cater to the needs of
less developed areas of the northern part of Pakistan. The ISE has set the
highest standards of operational efficiency and is committed to support a climate
of confidence and optimism that encourages and promotes trading activity.


It also provides for reasonable conducive environment to channalize the small
investments of the residents of less developed areas. The ISE offers an easy
access to both domestic as well as foreign investors and actively encourages the
listing of eligible and profitable companies, both large and small to make it an
exciting and diverse Exchange. The Exchange is playing a pivotal role for
economic growth of the area thereby contributing towards the overall economic
prosperity and welfare of the country.


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At present there are 104 members out of which 39 are corporate bodies including
commercial and investment banks, DFIs and brokerage houses. The other 65
Members are individual persons who are well educated, enterprising and
progressive minded. The affairs of the Exchange are governed by the Board of
Directors. The Board of Directors consists of ten directors, of which five are
elected member directors and four are non-member directors nominated by the
SECP while the managing director by virtue of his office is the tenth director of
the Board. In order to protect the interest of the investing public, an Investors
Protection fund has been established by the Exchange.


Since the inception of automated trading system (ISECTS), the trade volume has
been multiplying day by day and the average daily turnover has now crossed the
figure of 10 million shares. The automated system which was indigenously
developed, replaced the outcry system in 1997. Now all the listed securities are
traded through the ISECTS. The system of physical handling of shares and
securities has been phased out and majority of the scripts are settled through
Central Depository Company of Pakistan Limited.


In comparison with major financial markets around the World, the functioning of
capital market in Pakistan is still very much in its infancy and lacks advanced
technology. In this context efforts are being made to bring ISE in line with the
International system and methodology.


The turnover of shares on the Islamabad Stock Exchange (ISE) was 2.8 billion
shares during July-March 2004-05 as compared to 1.5 billion during the same
period last year. The ISE Network index has increased from 11894 points in June
2004 to 12894 points in March 2005, recording a growth of 8.4 percent. Eight
new companies were listed and Rs 18.8 billion was mobilized on the ISE during
the first nine months of the current fiscal year. The ISE started functioning in
August 1992 and within 14 years; it has developed into a vibrant, efficient and


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stable market. Today, the ISE is one of the premier stock exchanges of the
country known for the highest standard of transparency in its operations,
excellent risk management, dynamic market technology and lowest overall costs
of listing.


Profile of Islamabad Stock Exchange




-


Lahore Stock Exchange: Lahore Stock Exchange (Guarantee) Limited came
into existence in October 1970, under the Securities and Exchange Ordinance,
1969, of the Government of Pakistan, in response to the needs of the Provincial
metropolis of the Punjab. Only 83 members had its memberships and it was
housed in a rented building in the crowded area of Bank Square in exotic city of
Lahore. The number of members has increased from 83 to 150 over a period of
25 years. Inadequacy of space, crowded area and severe limitations of
communications cramped its growth. Only a few of all the members were active,
and they too had to work through Karachi Stock Exchange, or be limited to do
business in Bonus, Vouchers and Bonds.


It took the management all of two decades of uncertainties, apprehensions and
planning to construct a suitable building for itself and venture out to its present
location at 19-Khayaban-e-Aiwan-e-Iqbal, Lahore. Lahore Stock Exchange has
taken shape of a significant institution of Pakistan. It owes a debt of gratitude to
its past presidents and members of the Board who had contributed their time and
energy to realize the dreams of the LSE members. The turnover of shares on the

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Lahore Stock Exchange (LSE) during July-March 2004-05 was 14.0 billion
compared to 34.5 billion shares in the same period last year. Total paid up capital
with the LSE increased from Rs 361.5 billion in June 2004 to Rs 387.6 billion in
March 2005.
The LSE index, which was 2828 points in June 2004, increased to 4011 points in
March 2005. The market capitalization of the LSE has increased from Rs 1460
billion in June 2004 to Rs 2088 billion in March 2005. Seven new companies
were listed with the LSE during July-March 2004-05, as compared to nine in the
same period last year. The amount of funds mobilized at the LSE by way of
subscription was Rs 37.2 billion in the first nine months of the outgoing fiscal
year.


Profile of Lahore Stock Exchange




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Karachi Stock Exchange: Karachi Stock Exchange is the biggest and most
liquid exchange and has been declared as the ―Best Performing Stock Market of
the World for the year 2002‖. As on June 30, 2010; 645 companies were listed
with the market capitalization of Rs. 2,068.19 billion (US $ 34.70) having listed
capital of Rs. 438.49 billion (US $ 7.36 billion). KSE has been well into the 4th
year of being one of the Best Performing Markets of the world as declared by the
international magazine ―Business Week‖. Similarly the US newspaper, USA
Today, termed Karachi Stock Exchange as one of the best performing bourses in
the world.




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Five Year Performance of KSE:

In million except companies, index and bonds data


                                         5 YEARS PROGRESS 2006-2010

                                             Upto       Upto       Upto       Upto       Upto
                                          30-12-2006 29-12-2007 31-12-2008 31-12-2009 03-12-2010

Total No. of Listed Companies                     652            654             653            651              645

Total Listed Capital - Rs.                 519,270.17     671,255.82     750,477.55       814,478.74     914,608.13

Total Market Capitalisation - Rs.         2,771,113.94 4,329,909.79 1,858,698.90 2,705,879.83          3,112,350.06

KSE-100TM Index                              10040.50       14075.83        5865.01         9386.92        11406.66

KSE-30TM Index                               12521.54       16717.10        5485.33         9849.92        10993.62

KSE All Share Index                           6770.06        9956.76        4400.76         6665.55         7935.97

New Companies Listed during the year                9              14             10               4               6

Listed Capital of New Companies - Rs.       14,789.76      57,239.92      15,312.12         8,755.73      33,438.45

New Debt Instruments Listed during
                                                    3               3                 7            1               4
the year
Listed Capital of New Debt Instruments
                                             3,400.00       6,500.00      26,500.00         3,000.00       5,650.18
- Rs.
Average Daily Turnover - Shares in
                                               260.69         268.23          146.55         179.88          132.43
million

Average value of daily turnover - Rs.       31,610.71      25,262.97      14,228.35         7,450.75       4,340.64

Average Daily Turnover (FutureTM) YTD           82.68          61.69           30.76            1.03            4.56

Average Value of Daily Turnover - YTD       13,587.63       9,077.61        5,229.97           89.66         385.75

Foreign Investment in Securities Market

Inflow - Rs                                          -              -                 -            -                -

Outflow - Rs                                         -              -                 -            -                -

Net Inflow/(Outflow) - Rs                            -              -                 -            -                -




Today KSE has emerged as the key institution of the capital formation in
Pakistan with:-
       Listed companies 659, securities listed on the exchange 700: ordinary share
659, Preference shares 15 and debt securities (TFC's) 26.
       Listed capital Rs.438,489.99 million (US$ 7,357.21 million).


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     Market capitalization Rs.2,068,187.15 million (US$ 34,701.13 million)
     Membership strength at 200.
     Corporate Members are 112 out of which 9 are public listed companies
     Active Members are 155.
     Fully automated trading system with T+3 settlement cycle.
     Deliveries through central depository company
     National Clearing and Settlement System in place.


KSE began with a 50 shares index. As the market grew a representative index
was needed. On November 1, 1991 the KSE-100 was introduced and remains to
this date the most generally accepted measure of the Exchange. The KSE-100 is
a capital weighted index and consists of 100 companies representing about 88
percent of market capitalization of the Exchange.
The market performance during the period June 1998 to April 2005 is given
under.


Performance of KSE




The KSE is primarily influenced by some big blue chip companies including;
OGDC, PTCL, Pakistan State Oil etc. During the first three quarters of the current
fiscal year, the combined turnover of shares of ten big companies (OGDC, PTCL,

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―A‖ Pakistan PTA Ltd., Sui Southern Gas, FF Bin Qasim, D.G. Khan cement,
Fauji Fertilizer Bin Qasim, Fauji Cement and National Bank, Pakistan State Oil
and TRG Pakistan Ltd.) was 12.59 billion, which constituted 17.6 percent of the
total turnover of the KSE. These ten companies earned a profit after taxation of
Rs 65.22 billion in the current fiscal year up to March 2005. Out of Rs 65.22
billion after taxation profit, the share of PTCL and OGDC was Rs 51.58 billion
representing 79.1 percent of the ten big companies. In the first nine months of
2004-05, PTCL‘s after taxation profit was (Rs 29.2 billion). The price-earning ratio
of the ten big companies ranged from –50.5 in the case of TRG Pakistan Ltd. to
21.4 in respect of OGDC. This indicates that the business environment in the
current fiscal year has improved appreciably.




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Profile of Karachi Stock Exchange




4.2 Sector Wise Investment :


During the first nine months of the outgoing fiscal year, the KSE 100-share index
and aggregate market capitalization of 12 different sectors‘ have increased by
47.2 percent and 55.8 percent respectively, as against their increase of 50.1
percent and 78.3 percent in the same period last year. Total turnover of shares
on the KSE was 71.7 billion in the first nine months of 2004-05 as compared to
65.2 billion in the same period last year. Funds mobilized by the KSE during this
period amounted to Rs 34.1 billion as compared to Rs 61.7 billion in the same
period last year.


All but two of the 12 major trading groups on the KSE (cotton and other textiles,
pharmaceuticals & chemicals, auto & allied, cables and electric goods, paper and
board, cement, fuel and energy, transport and communication, banks and other
financial institutions, and miscellaneous) witnessed growth in their share indices,
ranging from 0.5 percent (banks and other financial institution) to 63.7 percent
(fuel and energy). Two sectors namely engineering and sugar & allied
encountered slight declines in their share indices. During the calendar year 2009,
total profit before taxation of the 12 trading groups amounted to Rs 229.5 billion
as compared to their before taxation profit of Rs 136.8 billion in 2003. The
performance of leading trading groups and companies for the first nine months of
the outgoing fiscal year is discussed below
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Sectoral Performance of KSE:


SECTOR
           SECTOR NAME                                                                TURNOVER
CODE

0530       Oil and Gas                                                                8,140,964
1350       Chemicals                                                                  19,714,611
1730       Forestry and Paper                                                         48,834
1750       Industrial metals and Mining                                               252,550
2350       Construction and Materials                                                 3,333,756
2720       General Industrials                                                        392,567
2730       Electronic and Electrical Equipment                                        5,619

2750       Industrial Engineering                                                     153,674
2770       Industrial Transportation                                                  5,859
2790       Support Services                                                           731,409
3350       Automobile and Parts                                                       162,848
3530       Beverages                                                                  4,902
3570       Food Producers                                                             273,799
36         BONDS                                                                      0

3720       Household Goods                                                            239,176
3740       Leisure Goods                                                              50
3760       Personal Goods                                                             13,614,543
3780       Tobacco                                                                    375,213
4530       Health Care Equipment and Services                                         49
4570       Pharma and Bio Tech                                                        43,336

5550       Media                                                                      1,552
5750       Travel and Leisure                                                         145,825

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6530       Fixed Line Telecommunication                                              1,325,195
7530       Electricity                                                               3,762,911
7570       Gas Water and Multiutilities                                              899,713
8350       Banks                                                                     11,872,946
8530       Non Life Insurance                                                        1,075,756
8570       Life Insurance                                                            159,110
8630       Real Estate Investment and Services                                       994,913

8770       Financial Services                                                        15,859,817
8980       Equity Investment Instruments                                             2,387,467
9530       Software and Computer Services                                            169,637
9570       Technology Hardware and Equipment                                         501




Cotton and Other Textiles:   In this group there are three sub-groups: (a) textile
spinning, (b) textile weaving & composite, and (c) other textiles. There were 217
companies listed with the KSE under this group in December 2009. The share
index of cotton and other textiles recorded a growth of 19.3 percent during the
first nine months of the current fiscal year as compared to a growth of 34.3
percent in the same period last year. Its market capitalization increased by 34.3
percent or by Rs 30.5 billion during July-March 2004-05 as compared to a rise of
27.8 percent (Rs 18.2 billion) in the same period last year.


Chemicals & Pharmaceuticals:   A total of 38 companies were listed with the KSE
under this group at the end of December 2009. During the first nine months of
the current fiscal year, its share index has declined by 1.6 percent as compared
to an increase of 49.7 percent in the comparable period of last year. Its market
capitalization stood at Rs 195.8 billion on 31st March 2010, showing an increase
of 23.3 percent over June 2009.




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Auto and Allied:   A total of 25 companies were listed with the KSE under this group
at the end of December 2009. Its share index increased by 28.7 percent, while its
market capitalization increased by 22.2 percent during the first nine months of
the current fiscal year.


Sugar and Allied:    Under this group, a total of 37 companies were listed with the
KSE with a market capitalization of Rs 14.8 billion. During the first three quarters
of the current fiscal year, the share index of sugar and allied posted a growth of
41.2 percent as compared to a rise of 17.5 percent in the comparable period last
year.


Cement:   At the end of 2009, there were 21 cement companies listed with the
KSE. The cement industry was one of the best performing sectors in the stock
market. Its market capitalization increased to Rs 75.5 billion on March 31, 2010
from Rs 65.1 billion in June 2009, recording a growth of Rs 16.0 percent.


Fuel & Energy:     A total of 26 companies were listed with the KSE. It is the most
dominant group in the stock market. Its share index grew by 63.7 percent during
the first nine months of the current fiscal year, which was the highest among the
12 trading sectors. Its market capitalization increased by a huge Rs 423.3 billion
to Rs 909.0 billion in March 2010 from Rs 485.8 billion in June 2004. Its market
capitalization constituted 43.0 percent of the aggregate market capitalization in
March 2010. In the corresponding date of the last year market capitalization of
this group was 37.2 percent. A swelling fuel and energy sector continued to be
one of the major market players in the current year along with transport and
communication, banking and finance, and cement. The energy sector has been
identified as an engine of growth along with 3 other sectors, (agriculture, small
and medium enterprises and information technology) by the government.
Companies like OGDC, PSO, SNGC, SSGC, Hub Power, and Pakistan Oil Fields
etc. led the current year‘s upsurge in the s tock market. These companies were
the main drivers of the stock market.


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Transport & Communication:   At the end of 2004, there were 14 companies of this
group listed with the KSE. Its share index and market capitalization increased by
54.9 percent and 60.0 percent respectively during July-March 2009-10 as
compared to their rises of 36.3 percent and 49.3 percent respectively in the same
period last year. Its market capitalization at Rs 309.7 billion constituted 14.6
percent of the aggregate market capitalization (AMC) in March 2010 making it a
major player on the KSE. The combined market capitalization of fuel and energy,
and transport & communication was Rs 1218.7 billion on March 31, 2010, which
constituted 57.6 percent of the AMC (Rs 2114.8 billion) as compared to their
share of 51.0 percent on the corresponding date of last year.


Banks & Other Financial Institutions:   In December 2009, a total of 159 companies
were listed with the KSE. There are 4 sub groups in this group: banks &
investment companies, modarabas, leasing companies, and insurance. During
the current fiscal year, the share index of this group has marginally increased by
0.5 percent. Its market capitalization however increased by 59.8 percent or from
Rs 187.1 billion in June 2009 to Rs 299.0 billion in March 2010.




Miscellaneous:   The miscellaneous group includes five sub-groups: jute, food &
allied, glass & ceramics, vanaspati & allied, and others. In December 2003, a
total of 92 companies were listed with the KSE, which came down to 89
companies at the end December 2004. Its share index and market capitalization
posted growth of 9.6 percent and 10.5 percent respectively in the first nine
months of the current fiscal year, as compared to their growth of 31.6 percent
and 38.5 percent respectively, in the same period last year.




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                                                         Why investors not investing in the Stock Markets
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4.3    Present and Future Prospects


Foreign investors are pushing funds back into Pakistan stocks, setting the market
up for its second-best year for inflows in a decade, drawn by cheap valuations
and some economic and security improvements.

Such investments may be paying off as well because the main Karachi stock
index .KSE is one of the few markets in Asia showing a rise since the beginning
of the year.

While the benchmark MSCI Asia ex-Japan index is down 11 percent this year,
the KSE is up 3 percent.

"Pakistan remains one of the cheaper markets in Asia and emerging markets
with an improving domestic situation and a stabilising economy," said Mark
Mobius, executive chairman at Templeton Asset Management Ltd.

Net foreign portfolio investment into the stock market reached more than $530
million (362 million pounds) in the first 11 months of 2009/10, compared with a
year-earlier outflow of $408 million.

If that holds to the end of the July-June fiscal year, it would mark the biggest net
foreign investment in more than 10 years, apart from 2007.

The government has pulled back from the brink of a debt default thanks to
International Monetary Fund emergency funding and is seeing some success in
military operations against Taliban militants behind bomb attacks across the
country.

A government led by the party of assassinated former prime minister Benazir
Bhutto has proven more resilient than critics predicted and recently introduced
constitutional reforms to bolster parliamentary rule, and stability.




                                   Institute of Business and Technology                               44
                                                           Why investors not investing in the Stock Markets
________________________________________________________________________

The powerful military, which has ruled for more than half of Pakistan's history, is
seen as largely satisfied with the civilian government and loathe to step back in
to politics while it hands are full battling militancy.

The economy is also pulling out of the global downturn and this year the
government expects growth above 4 percent compared with record low growth
last year of 1.2 percent.

The Karachi stock market .KSE has more than doubled from lows hit last year
during the worst of the global crisis, although many stock markets have seen
similar gains.

To be sure, Pakistan remains one of Asia's riskiest investment destinations,
Reuters surveys show.

That's why most foreign money goes into energy stocks or fertiliser company
Engro Chemicals (EGCH.KA). Apart from having cheaper valuations compared
with many regional peers, they offer the liquidity foreign investors need should
they decide to sell.

Al Qaeda-linked Taliban militants remain a serious threat despite the military's
successes, and chronic power cuts and rising prices are eroding the
government's support. There remains criticism of a lack of policy stability.

In addition, the inflow figures have been flattered by the lifting of a KSE trading
floor, which had stopped investors selling below 9,144 points between August
and December 2008.




Brokerage Invest and Finance Securities Ltd says the lowest one-year forward
price-to-earnings ratio in Asia of just 6.25 is also drawing funds. That's less than
half China's level, it says.



                                     Institute of Business and Technology                               45
                                                        Why investors not investing in the Stock Markets
________________________________________________________________________

"Of course investors are interested in seeing fewer terrorist attacks, but many
investors have become inured to such situations knowing that they are isolated
incidents," Mobius said in late May. Foreign direct investors seem less confident.

Actual FDI has almost halved to $1.77 billion in the first 10 months of 2009/10
compared with $3.20 billion a year earlier. Such FDI would be the lowest level
since year ending June 30, 2004 when it was $949 million.

Asad Iqbal, chief investment officer at Faysal Asset Management Ltd, said that
apart from obvious security concerns, FDI is a victim of ever-changing
government policies.

He cited export tax on yarn. The government raised it to 15 percent last month
only to reverse the decision in the budget Saturday.

For the country to be able to generate healthy long-term investment, clear
policies along with assurances of security are needed.




                                  Institute of Business and Technology                               46
                                                            Why investors not investing in the Stock Markets
 ________________________________________________________________________



            05. PROBLEMS OF PAKISTAN’S STOCK MARKET


5.1 Economical Issues


The economy of Pakistan is the 25th largest economy in the world in terms of
purchasing power, and the 45th largest in absolute dollar terms. Pakistan has a
semi-industrialized economy, which mainly encompasses textiles, chemicals, food
processing, agriculture and other industries.


Inflation remains the biggest threat to the economy, jumping to more than 9% in
2005 before easing to 7.9% in 2006. In 2008, following the surge in global petrol
prices inflation in Pakistan has reached as high as 25.0%.
Due to inflation and economic crisis worldwide, Pakistan's economy reached a
state of Balance of Payment crisis. "The International Monetary Fund bailed out
Pakistan in November 2008 to avert a balance of payments crisis and in July last
year increased the loan to $11.3 billion from an initial $7.6 billion."


By October 2007, Pakistan raised back its Foreign Reserves to a handsome $16.4
billion. Exceptional policies kept Pakistan's trade deficit controlled at $13 billion,
exports boomed to $18 billion, revenue generation increased to become $13 billion
and attracted foreign investment of $8.4 billion.


Since the beginning of 2008, Pakistan's economic outlook has taken stagnation.
Security concerns stemming from the nation's role in the War on Terror have
created great instability and led to a decline in FDI from a height of approximately
$8 bn to $3.5bn for the current fiscal year. Concurrently, the insurgency has forced
massive capital flight from Pakistan to the Gulf. Combined with high global
commodity prices, the dual impact has shocked Pakistan's economy, with gaping
trade deficits, high inflation and a crash in the value of the Rupee, which has fallen
from 60-1 USD to over 80-1 USD in a few months. For the first time in years, it may

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                                                           Why investors not investing in the Stock Markets
 ________________________________________________________________________

have to seek external funding as Balance of Payments support. Consequently,
S&P lowered Pakistan‘s foreign currency debt rating to CCC-plus from B, just
several notches above a level that would indicate default. Pakistan‘s local currency
debt rating was lowered to B-minus from BB-minus. Credit agency Moody‘s
Investors Service cut its outlook on Pakistan‘s debt to negative from stable due to
political uncertainty, though it maintained the country‘s rating at B2.The cost of
protection against a default in Pakistan‘s sovereign debt trades at 1,800 basis
points, according to its five year credit default swap, a level that indicates investors
believe the country is already in or will soon be in default.
This weak and uncertain condition of economy stop investors to invest in Pakistan
specially in Stock markets.



 5.2 Political Issues

 Political stability play a vital role for strength of economy as well as stock
 markets. The government is in no immediate danger of being brought down. The
 ruling coalition, led by President Asif Ali Zardari‘s party, has a comfortable
 majority in parliament and the military, which unlike the government is seen to
 have responded effectively to the disaster, is not going to stage a coup. But
 anger with a government already unpopular is likely to intensify. The economic
 impact of the floods will be severe and food shortages and rising prices could
 spark protests. The opposition, led by former prime minister Nawaz Sharif, has
 been critical of the government but has not called street protests. Analysts say
 the opposition is content to let the government struggle but opposition leaders
 could come under pressure from their rank and file to take advantage of growing
 discontent to go on the offensive. A well-organised opposition taking the lead of
 popular protests over prices and food shortages could be explosive. In a worst-
 case scenario, the military might feel compelled to step in if protests got out of
 hand. But analysts say the opposition is loathe to create the conditions which
 would precipitate military intervention, which would block its bid to gain power
 through a general election, due by 2013.The government should launch a proper

                                     Institute of Business and Technology                               48
                                                         Why investors not investing in the Stock Markets
________________________________________________________________________

economical policy to encourage the small and medium investors and to protect
them and their investment.



5.3 Tax Issues

Officials from Pakistan‘s tax collection agency, the FBR (Federal Bureau of
Revenue) held emergecny meetings with top managers of the country‘s main
stock market - the say many investors are opposed fundamentally to plans for
documenting their earnings. ―Paying the tax of up to 10 per cent is secondary.
The annoying issue is having to document the incomes too. People now have to
file returns‖, a Karachi fund manager told the Financial Times.

But it is an odd reaction from a community which has long pointed fingers at
wealthy landowners for remaining exempt from paying an income tax. Farm
incomes in Pakistan for long have been exempt from paying Karachi stock
exchange (KSE), to help stem a slide in share prices.

It is an unusual move for the tax authorities to become involved in affairs of the
stock market. But there is a good reason. In the past two days alone, the KSE
lost about 2 per cent of its net value as nervous investors rushed to sell their
shares in reaction to this week‘s withdrawal of a tax exemption on stock market
profits.

Knowledgeable insiders an income tax, prompting criticism from urbanites. And
yet, Pakistan‘s very future depends on its ability to make its wealthy elite pay
their dues. As the country battles Taliban and Al-Qaeda militants across its
frontier lands along the Afghan border, its internal economy has eroded badly.
Basic services such as education and health remain sorely neglected and
increasingly out of reach for the poor.




                                   Institute of Business and Technology                               49
                                                        Why investors not investing in the Stock Markets
________________________________________________________________________

Pakistan‘s tax to GDP ratio at about 9 per cent is the lowest among its south
Asian peers. Equally appalling is the figure that just over 1 per cent of the
population pays an income tax.

It‘s clear that the ability of this nuclear-armed south Asian country to progress
depends on clamping down on those who evade taxes. If the tax authorities
decide on Saturday to back off from taxing stock market gains, it won‘t just mean
the unraveling of a long overdue effort at reform. It will become even harder to
tax other parts of the economy including the rich rural landowners.




                                  Institute of Business and Technology                               50
                                                        Why investors not investing in the Stock Markets
________________________________________________________________________

                        06. REASEARCH ANALYSIS



6.1     Questionnaire Analysis:


1.      Do you invest in any of financial instrument/scheme other then stock?


                 Number       of Percentage               Male                    Female
                 Respondent
Yes              9                33.3%                   6                       3
No               17               63.0%                   11                      6
Don’t Know       1                3.7%                    0                       1
Didn’t Reply     0                0.0%                    0                       0
Total            27




2.      Are you planning to invest within few years?




                 Number       of Percentage               Male                    Female
                 Respondent
Yes              10               37.0%                   7                       3
No               7                25.9%                   5                       2
Don’t Know       2                7.4%                    1                       1
Didn’t Reply     8                29.6%                   4                       4
Total            27




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                                                          Why investors not investing in the Stock Markets
________________________________________________________________________

3. Which type of investment (Stocks, bond, saving certificate etc) you would
prefer the most?


                   Number       of Percentage               Male                    Female
                   Respondent
Stocks             6                22.2%                   4                       2
Bonds              4                14.8%                   2                       2
Saving             6                22.2%                   3                       3
Certificate
Others             11               40.7%                   8                       3
Total              27




   12

   10

    8

    6                                                                                   Series1

    4

    2

    0
                                             e




                                                              s
                          ds
               s




                                          at




                                                           er
            ck




                        on




                                       ic




                                                         th
         to




                                      t if
                        B




                                                        O
        S




                                    er
                                   C
                                g
                              in
                            av
                            S




                                    Institute of Business and Technology                               52
                                                         Why investors not investing in the Stock Markets
________________________________________________________________________

4. Attitude towards investment risk, select one .


                 Number       of Percentage                Male                    Female
                 Respondent
Conservative     2                 7.4%                    1                       1
Cautious         7                 25.9%                   6                       1
Balanced         10                37%                     4                       6
Adventurous      1                 3.7%                    0                       1
Speculative      4                 14.8%                   3                       1
Didn’t reply     3                 11.1%                   3                       0
Total            27




Attitude towards investment Risk


        12

        10

         8

         6                                                                             Series1

         4

         2

         0
                      e




                   us


                     e
                   us


                     d




                    ly
                   iv




                t iv
                ce




               ep
               ro
               at


              tio




             la
            an


            tu
            rv




            tr
         au




         cu
        en
         al
        se




         n‘
       C




      pe
       B




      id
    on




     dv




    D
    S
   A
   C




                                   Institute of Business and Technology                               53
                                                        Why investors not investing in the Stock Markets
________________________________________________________________________

5. How much return would you expect of your investment?


                   Number     of Percentage               Male                    Female
                   Respondent
Lowest             0              0.0%                    0                       0
Low                1              3.7%                    1                       0
Average            8              29.6%                   6                       2
High               12             44.4%                   8                       4
Highest            5              18.5%                   2                       3
Didn’t reply       1              3.7%                    0                       1
Total              27




Expected Rate of Return



  14

  12

  10

   8
                                                                                         Series1
   6

   4

   2

   0
          Lowest        Low   Average      High        Highest           Didn‘t
                                                                         reply




                                  Institute of Business and Technology                               54
                                                      Why investors not investing in the Stock Markets
________________________________________________________________________

6. Do you know where the Karachi Stock Exchange building is situated?




                Number      of Percentage               Male                    Female
                Respondent
Yes             21              77.8%                   15                      6
No              4               14.8%                   1                       3
May be          1               3.7%                    0                       1
Didn’t reply    1               3.7%                    1                       0
Total           27




7. Do you know how Karachi Stock Exchange works?




                Number      of Percentage               Male                    Female
                Respondent
Yes             8               29.6%                   6                       2
No              11              40.7%                   6                       5
Partially       8               29.6%                   5                       3
Didn’t reply    0               0.0%                    0                       0
Total           27




                                Institute of Business and Technology                               55
                                                              Why investors not investing in the Stock Markets
________________________________________________________________________


     12

     10

     8

     6

     4

     2

     0
               Yes                No                    Part ially              Didn‘t reply




8. Do any of your family members or friend trades in Stocks?


                     Number   of Percentage                    Male                     Female
                     Respondent
Yes                  12                44.4%                   7                        5
No                   14                51.9%                   9                        5
Didn’t reply         1                 3.7%                    1                        0
Total                27




                                       Institute of Business and Technology                                56
                                                      Why investors not investing in the Stock Markets
________________________________________________________________________

9. Does Newspaper listing ( Stock related coverage given in newspaper ) help
you in understanding Stock Function?


                 Number    of Percentage                Male                    Female
                 Respondent
Yes              6              22.2%                   3                       3
No               10             37.0%                   6                       4
Slightly         9              33.3%                   6                       3
Didn’t reply     2              7.4%                    2                       0
Total            27




     12

     10

      8

      6                                                                             Series1

      4

      2

      0
               Yes        No           Slightly              Didn‘t
                                                             reply

Is Newspaper listing helpful?




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                                                       Why investors not investing in the Stock Markets
________________________________________________________________________

10. Do you think there is enough material ( books/Magazines) available to assist
you in getting information about stock market ?


                Number       of Percentage               Male                    Female
                Respondent
Yes             9                33.3%                   5                       4
No              9                33.3%                   6                       3
Don’t Know      9                33.3%                   6                       3
Didn’t Reply    0                0.0%                    0                       0
Total           27




11. Is the provided information through newspaper, magazines, books reliable
and accurate?


                Number       of Percentage               Male                    Female
                Respondent
Yes             14               51.9%                   8                       6
No              3                11.1%                   3                       0
Don’t Know      8                29.6%                   4                       4
Didn’t Reply    2                7.4%                    2                       0
Total           27




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                                                      Why investors not investing in the Stock Markets
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     16

     14

     12

     10

      8                                                                          Series1
      6

      4
      2

      0
               Yes        No          Don‘t                 Didn‘t
                                      Know                  Reply




12.Are you aware of brokerage system ( commission/ fee etc ) ?


                 Number     of Percentage               Male                    Female
                 Respondent
Yes              12             44.4%                   8                       4
No               10             37.0%                   7                       3
Partially        5              18.5%                   2                       3
Didn’t reply     0              0.0%                    0                       0
Total            27




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                                                      Why investors not investing in the Stock Markets
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13. Are you aware of Stocks speculation?


                Number      of Percentage               Male                    Female
                Respondent
Yes             12              44.4%                   8                       4
No              13              48.1%                   8                       5
Partially       2               7.4%                    1                       1
Didn’t reply    0               0.0%                    0                       0
Total           27


14. Are you aware of Dividend system?


                Number      of Percentage               Male                    Female
                Respondent
Yes             20              74.1%                   12                      8
No              7               25.9%                   5                       2
Didn’t reply    0               0.0%                    0                       0
Total           27


15. Are you aware of Bull/Bear Markets?


                Number      of Percentage               Male                    Female
                Respondent
Yes             16              59.3%                   10                      6
No              11              40.7%                   7                       4
Didn’t reply    0               0.0%                    0                       0
Total           27




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                                                   Why investors not investing in the Stock Markets
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                             Awareness Level

  80.00%
  70.00%
  60.00%
                                                                                 brokerage system
  50.00%
                                                                                 Stock Speculation
  40.00%
                                                                                 Dividend system
  30.00%
                                                                                 Bear/Bull system
  20.00%
  10.00%
   0.00%
               Yes         No          Partially            Didn‘t
                                                            reply




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                                                      Why investors not investing in the Stock Markets
________________________________________________________________________

16. Have you seen any of advertisement about stocks?




                Number      of Percentage               Male                    Female
                Respondent
Yes             9               33.3%                   7                       2
No              17              63.0%                   9                       8
Didn’t reply    1               3.7%                    1                       0
Total           27




17. How much money do you think is required to start basic investment in stock
exchange?


                Number      of Percentage               Male                    Female
                Respondent
Below 10,000    2               7.4%                    1                       1
10,001-15,000 7                 25.9%                   5                       2
15,001-20,000 8                 29.6%                   4                       4
20,000-25,000 6                 22.2%                   4                       2
Above 25000     4               14.8%                   3                       1
Didn’t reply    0               0.0%                    0                       0
Total           27




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                                                   Why investors not investing in the Stock Markets
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           Money Require to start trade in Stock Market

  9
  8
  7
  6
  5
  4
  3
  2
  1
  0
       Below     10,001-   15,001-        20,000-          Above        Didn‘t reply
       10,000    15,000    20,000         25,000           25000




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                                                       Why investors not investing in the Stock Markets
________________________________________________________________________

18. What are the factors, which stop you from investing in stocks?




                  Number     of Percentage               Male                    Female
                  Respondent
Lack of           12             44.4%                   7                       5
Knowledge
about stocks
Very Risky        14             51.9%                   10                      4
Not     allowed 10               37.0%                   6                       4
in Islam
Stock             7              25.9%                   4                       3
speculation
Economy        of 17             63.0%                   10                      7
Country
Law & Order 13                   48.1%                   10                      3
condition
Fraud      from 7                25.9%                   5                       2
broker side
Fraud      from 9                33.3%                   7                       2
company
side
Environment       7              25.9%                   3                       4
of Stock
exchange
Other             5              18.5%                   2                       3
Factors
Didn’t reply      0              0.0%                    0                       0




                                 Institute of Business and Technology                               64
                                                                                                                    Why investors not investing in the Stock Markets
________________________________________________________________________


  70.00%                                                                      63.00%
  60.00%                           51.90%
                                                                                             48.10%
  50.00% 44.40%
                                                  37.00%
  40.00%                                                                                                            33.30%
                                                                25.90%                               25.90%                        25.90%                                               Series1
  30.00%
                                                                                                                                                             18.50%
  20.00%
  10.00%                                                                                                                                                                0.00%
     0.00%




                                                                                                                                    Environment
                                                                                                      Fraud from


                                                                                                                      Fraud from
                                                                                                      broker side
                                                                                Economy of




                                                                                                                                                              Factors

                                                                                                                                                                         Didn‘t reply
                                     Very Risky




                                                                                                                                                  exchange
             Lack of




                                                                speculation
                                                  Not allowed




                                                                                             Order
                                                                                             Law &
                       Knowledge




                                                                                                                       company




                                                                                                                                                               Other
                                                                                  Country
                                                    in Islam




                                                                                                                                     of Stock
                                                                  Stock
                         about




19. Do educational institutes provide adequate knowledge about stock markets?


                            Number                              of Percentage                                        Male                                      Female
                            Respondent
Yes                         5                                             18.5%                                      3                                         2
No                          8                                             29.6%                                      5                                         3
Don’t Know                  13                                            48.1%                                      8                                         5
Didn’t Reply                1                                             3.7%                                       1                                         0
Total                       27




                                                                              Institute of Business and Technology                                                                       65
                                                     Why investors not investing in the Stock Markets
________________________________________________________________________

Personal Information:



20. Age


                  Number   of Percentage               Male                    Female
                  Respondent
Less than 18      0            0.0%                    0                       0
18-25 years       20           74.1%                   13                      7
26-35 years       4            14.8%                   2                       2
More than 35      3            11.1%                   2                       1
Didn’t Reply      0            0.0%                    0                       0
Total             27




21. Gender


                               Number          of Percentage
                               Respondent
                 Male          17                    63.0%
                 Female        10                    37.0%
                 Total         27




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22. What is your annual income ?




                 Number of Respondent                Percentage            Male         Female
Below 10,000     4                                   14.8%                 3            1
10,001-15,000    4                                   14.8%                 2            2
15,001-20,000    4                                   14.8%                 3            1
20,000-25,000    3                                   11.1%                 2            1
Above 25000      12                                  44.4%                 7            5
Didn’t reply     0                                   0.0%                  0            0
Total            27




23. Education


                 Number of Respondent                Percentage            Male         Female
Below Higher 0                                       0.0%                  0            0
Secondary
Highere          8                                   29.6%                 6            2
secondary / A-
level
Bachelors        12                                  44.4%                 7            5
Masters          7                                   25.9%                 4            3
Other            0                                   0.0%                  0            0
Didn’t reply     0                                   0.0%                  0            0
Total            27




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                                                         Why investors not investing in the Stock Markets
________________________________________________________________________



            07. CONCLUSION AND RECOMMENDATIONS


7.1    Conclusion:


Most of the people are aware of stock market and they consider it as one of the
popular investment medium but they are not very much familiar with the
procedures, segments and functions of stock market. This lack of specific
information about stock functionality exaggerates the present fear of stock
market.


People trust more on magazines and financial books then newspapers in making
investment decision. Mostly investors keep balance or cautious risk strategy, and
want high return on their investment. Stock has the potential to provide higher
return on any investment comparative to other security but it also carries higher
risk. Awareness level of stock market is low regardless of daily listing in
newspaper. People have not seen any major advertisement of stocks.


Economy of the country is the major factor that prevents investors from investing
in stock market, other then that volatile nature of stock market and law order
situation plays its part in hindering investors to invest in stock market. Knowledge
about Stocks is the fourth important factor that stops investor.




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                                                          Why investors not investing in the Stock Markets
________________________________________________________________________

7.2      Recommendations:


Following are some recommendations that may be helpful for attracting
investors:


      1. Economy of the country is the major factor for any investment. Smooth
         economy will definitely generate more investment in stock market.


      2. Newspaper listing is not much helpful to people. It should be reformatted
         to make it understandable to general people.


      3. People trust on books and magazines. They can play important role in
         educating people about stock market. Magazines and financial book
         should easily available to general mass and they should contain up-to-
         date information, which help investor in evaluating opportunity.


      4. There is no particular advertisement of stocks. There should be proper
         advertisements which encourage new people to invest in stock market.




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                               BIBLIOGRAPHY


Books:


Brigham, C. Ehrhardt (2003). Financial Management, theory and Practice,
   11th edition.
Frederic S. Mishkin (2008).The Economics of Money, Banking, & Financial
   Markets, Seventh Edition, Addison-Wesley, Boston, MA, latest edition.


Web sites:


 http://www.brecorder.com/news/statistics/indicators/
 http://www.eagletraders.com/books/afm/afm2.htm
 http://www.finance.mapsofworld.com/
 http://www.investorguide.com/igu-article-286-basic-economic-concepts-
   introduction-to-inflation-and-its-impact.html
 http://www.opfblog.com/2037/inflation-in-pakistan-%E2%80%94-who-to-
   blame/
 http://www.statpak.gov.pk/depts/fbs/statistics/price_statistics/methodology_pri
   ce_statistics.html
 http://www.sbp.org.pk/reports/annual/
 http://www.statpak.gov.pk/depts/fbs/statistics/price_statistics/methodology_pri
   ce_statistics.html
 http://www.stockmarkettiming.com/psp.html
 http://www.econ.iastate.edu/classes/econ308/tesfatsion/finintro.htm
 http://useconomy.about.com/od/themarkets/a/capital_markets.htm
 http://www.learningtree.com/investor/index.htm
 http://www.nasdr.com




                                  Institute of Business and Technology                               70
                                                    Why investors not investing in the Stock Markets
________________________________________________________________________


    www.jang.cm.pk/thenews.html
    www.brecorder.com
    www.nation.com.pk
    www.dawn.com.pk
    www.dailytimes.com.pk
    www.kse.com.pk
    www.ise.com.pk
    www.lse.com.pk
    www.investopedia.com
    www.frbsf.org/ecomics/
    www.accountancy.pk
    www.finance.gov.pk
    www.jstor.org
    www.wikipedia.com
    www.surveysystems.com
    www.en.mini.hu/stockmarket/stock.html




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                                                       Why investors not investing in the Stock Markets
________________________________________________________________________

                        QUESTIONNAIRE
   1. Do you invest in any of financial instrument/Scheme other then Stocks?
   □ Yes
   □ No
   □ Don‘t know
   If you do invest in any security then GOTO Question#4

   2. Are you planning to invest within few years?
   □ Yes
   □ No
   □ Don‘t know

   3. If you do invest in then which type of investment (Stock, bonds, saving
      Certificates etc) you would prefer the most? Specify

   4. Attitude towards Investment Risk, select one
   □ Conservative
   □ Cautious
   □ Balanced
   □ Adventurous
   □ Speculative

   5. How much return would you expect of your investment?
   Lowest
   Low
   Average
   High
   Highest

   6. Do you know where the Karachi stock exchange‘s building is?
   □ Yes
   □ No
   □ May be

   7. Do any of your family members or friend trades in stocks?
   □ Yes
   □ No

   8. Do you know how the Karachi Stock Exchange works?
   □ Yes
   □ No
   □ Partially

   9. Does Newspaper Listing (Stock related given in newspapers) help you
      understanding functions?
   □ Yes

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   □ No
   □ Slightly

   10. Do you think there are enough material (Books/Magazines) available to
       assists you in getting information about stock market?
   □ Yes
   □ No
   □ Don‘t know

   11. Is the provided information through newspaper, magazines, and books
       reliable and accurate?
   □ Yes
   □ No
   □ Don‘t know

   12. Are you aware of brokerage system (commission/fee etc)?
   □ Yes
   □ No
   □ Partially

   13. Are you aware of stocks speculation?
   □ Yes
   □ No
   □ Partially

   14. Are you aware of Dividend system?
   □ Yes
   □ No

   15. Are you aware of Bear/Bull Markets?
   □ Yes
   □ No

   16. Have you seen any advertisement about stocks?
   □ Yes
   □ No

   17. How much money do thing is required to start basic investment in Stock
       Exchange?
   □ Below 5000
   □ 5000-10000
   □ 10001-20000
   □ 20000-30000
   □ ABOVE 25000




                                Institute of Business and Technology                               73
                                                       Why investors not investing in the Stock Markets
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   18. What are the factors, which stops you from investing in stocks? Check as
       many,
   □ Lack of Knowledge about Stocks
   □ Very Risky
   □ Not allowed in Islam (Satta)
   □ Stock Speculation
   □Economy of Country
   □ Country law and order situation
   □ Fraud from Brokerage Side
   □ Fraud from Company side
   □ Environment of Stock Exchange
   □ Other. Specify

   19. Do educational institute provides adequate teaching about stock markets?
   □ Yes
   □ No
   □ Don‘t know

   Personal Information

   20. Age
   □ Less then 18
   □ 18-25 YEARS
   □ 26-35 YEARS
   □ MORE THAN 35

   21. Gender
   □ Male
   □ Female

   22. What is your annual income?|
   □ Below 10000
   □ 10000-15000
   □ 15000-20000
   □ 20000-25000
   □ ABOVE 25000

   23. Education
   □ Below Higher Secondary
   □ Higher Secondary/ A Level
   □ Bachelors
   □ Masters
   □ Other Specify




                                 Institute of Business and Technology                               74
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                             Institute of Business and Technology                               75

								
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