KSE to be corporatized, demutualized by December 31, 2006

Posted on 10.31.06 by StockPK Team @ 11:35 am    

Karachi Stock Exchange (KSE) has set December 31, 2006, for demutualization of the exchange as part of reform process and to run it on international professional lines, according to annual report 2006 issued here on Monday.

On behalf of KSE Board of Directors, Zaffar A Khan, Chairman and M A Lodhi, Managing Director in their directors’ report said, “Through insertion of a new section 32E in the Securities and Exchange Ordinance, 1969 by virtue of Finance Bill 2006-07, it has been envisaged that the Stock Exchanges shall stand corporatized and demutualized by December 31, 2006 or from such later date as may be permitted by the Commission.”

The first big step in this exercise (demutualization) is to complete the valuation of the exchange by a globally renowned consultant. The appointment of the consultant is now imminent, report added.

As reported in the last year’s review, a preliminary report, identifying the various issues and recommendations thereon in line with the international practices, along with Valuation Report on the net worth of the Exchange and its Business Plan had been submitted to the Securities and Exchange Commission of Pakistan (SECP).

Therefore, the valuation of KSE is yet to be carried out by an international investment bank for demutualization as per rule defined in the Memorandum of Understanding (MoU) signed between SECP and KSE on January 28, 2006.

The next step is the corporatization, whereby KSE, presently a company limited by guarantee, will be converted into a company limited by shares and 100 per cent of its shares will be issued to its members. Subsequently, the members would be required to disinvest 40 per cent of their shareholding to financial institutions and 20 per cent to general public by having the exchange listed locally or globally.

The net income of KSE for the year ended on June 30, 2006, increased by Rs102.448 million to Rs603.022 million. Therefore, the revenues of the exchange for the year stood at Rs1,182 million as compared to Rs977 million of the last year, thereby recording an increase of about 2.1 per cent over previous year. This was mainly due to increase in trading fee, other income comprising of share of profit from associated companies and return on surplus funds placed with the financial institutions.

The Board has recommended re-appointment of Ford, Rhodes, Sidat, Hyder & Co., Chartered Accountants as statutory auditors of the Exchange for the year ending June 30, 2007 at a remuneration of Rs5,000,000 inclusive of half yearly review for the approval of the members.

The Boar of Directors at Annual General Meeting held here on the same day of issuing annual report 2006, has approved name of top 25 companies for the award for 2004-05. One of the Board of Director’s said that KSE has invited Prime Minister of Pakistan to confer the best performing award to the recipients. Exchange requested PM to finalize date for his availability from November 15 to first week of December 2006 thus a final date for award distribution ceremony would be announced accordingly.

Meeting also approved new risk management system i.e. VAR (Value at Risk) that is going to be implemented from November 06, 2006. A detailed presentation in this regard would be delivered on Tuesday (today) to the members KSE so that they would understand the working of new risk management system and operate it efficiently, he added.

During the just ended financial year, KSE 100-share Index surged from 7,450 points as on July 01, 2005 to reach an all time high record of 12,273.77 points on April 17, 2006 and finally closed at 9,989 points on June 30, 2006, registering a remarkable rise by 34 per cent during the year, according to annual report 2006. During the first half of FY06, the market maintained a strong upward trend and improved by 28 per cent (2,106 points) to close at 9,556 points. The second half of the year, however, was extremely volatile and the index gained only 4.5 per cent (433 points), report added.

Market capitalisation during the year touched a record Rs3,460 billion (US$57.7 billion) on April 17, 2006, but eased to Rs2,801 billion (US$46.7 billion) on June 30, 2006 as compared to Rs2,068 billion (US$34.5 billion) on July 01, 2005, showing a growth of 35.4 per cent.

Despite the healthy run-up witnessed on the bourse, the average daily turnover of ready market of 324 million shares was lower as compared to the average daily turnover of 350 million shares of last year.

Source: The News