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  • History of Pakistan Stock Exchange (PSX): From 1947 to Today | Paykistan

    Key Points

    • The Pakistan Stock Exchange (PSX) started as the Karachi Stock Exchange in 1947, shortly after Pakistan’s independence.
    • It grew to include the Lahore Stock Exchange (1970) and Islamabad Stock Exchange (1989), merging into PSX in 2016.
    • PSX now lists over 500 companies, with a market cap exceeding Rs 9.31 trillion, serving more than 313,000 investors.
    • It has modernized with electronic trading systems and won awards for Islamic finance, but faces challenges like market manipulation.

    Background

    The PSX is Pakistan’s main stock exchange, where companies raise capital and investors trade securities. It evolved from a small regional exchange to a national market, reflecting Pakistan’s economic growth.

    Historical Development

    Founded in 1947 as the Karachi Stock Exchange, it began with five companies and Rs 37 million capital. It expanded with Lahore (1970) and Islamabad (1989) exchanges, merging in 2016 under the PSX name. Key milestones include the KSE 100 Index (1991) and electronic trading (1998, upgraded 2023).

    Current Status

    Today, PSX lists 524 companies on its Main Board and 3 on GEM Board, with a market cap over Rs 9.31 trillion. It serves over 313,000 investors and offers tools like online accounts and ETFs, earning Islamic finance awards for 2021-2023.

    Challenges and Future

    While PSX has grown, it faces issues like market manipulation and regulatory enforcement. Future prospects include attracting foreign investment and leveraging technology for growth.

    A Comprehensive History of the Pakistan Stock Exchange (PSX)

    The Pakistan Stock Exchange (PSX) stands as a pivotal institution in Pakistan’s financial ecosystem, facilitating capital formation and investment for over seven decades. This detailed exploration traces its evolution from its inception as the Karachi Stock Exchange (KSE) in 1947 to its current status as a modern, integrated national exchange. We will delve into its establishment, key milestones, regulatory developments, technological advancements, and economic impact, providing a thorough understanding of its role in Pakistan’s economy.

    Early Beginnings: The Karachi Stock Exchange (1947–2016)

    The history of the PSX begins with the establishment of the Karachi Stock Exchange (KSE) on September 18, 1947, shortly after Pakistan gained independence. Incorporated on March 10, 1949, as the Karachi Stock Exchange (Guarantee) Limited, a company limited by guarantee, it was located in the Stock Exchange Building (SEB) on Stock Exchange Road in Karachi’s business district. Initially, the KSE was a small bourse, starting with only five listed companies and a total paid-up capital of Rs 37 million.

    In its early years, trading was conducted through the traditional open outcry system, where traders would shout “La-oo” for buy orders and “Lay” for sell orders on the trading floor. Membership was capped at 200 individuals, each holding a trading card, which became highly valued over time. By the mid-1990s, these cards were worth approximately Rs 40 million, stabilizing at around Rs 27.5 million by 2002. This period saw the KSE grow as Pakistan’s economy expanded, but it also faced challenges such as market manipulation and high volatility.

    A significant milestone came on May 27, 1998, when the KSE transitioned to the Karachi Automated Trading System (KATS), marking a shift to electronic trading. This upgrade was supported by a $125 million loan from the Asian Development Bank, part of broader capital market reforms in the early 1990s. The introduction of the KSE 100 Index on November 1, 1991, further solidified its role as a key benchmark for market performance, alongside other indices like the KSE 50 Index, KSE 30 Index, and KMI 30 Index, totaling 16 indices today.

    The 1990s also saw regulatory efforts to stabilize the market. The Securities and Exchange Commission of Pakistan (SECP) was established in 1999 to regulate and oversee the exchange. Khalid Mirza, appointed as SECP Chairman in March 2000, led reforms to address issues like market manipulation, fund diversion, and lack of margin requirements. However, challenges persisted, with brokers controlling 60% of the board even after new SECP regulations, and penalties for misconduct remaining minimal at $30 per offense. A notable regulatory milestone was the introduction of the Companies (Buy-back of Shares) Rules, 1999, allowing companies to repurchase their shares. In 2002, Alhamd Textile Mills became the first company to buy back shares under these rules, marking a significant step in corporate governance.

    Expansion and Integration: The Emergence of Multiple Exchanges (1970–2016)

    As Pakistan’s economy grew, the need for additional stock exchanges to serve different regions became apparent. In October 1970, the Lahore Stock Exchange (LSE) was established to meet the investment and listing needs of Lahore and its surrounding areas. Similarly, in October 1989, the Islamabad Stock Exchange (ISE) was set up to cater to investors and companies in the northern parts of the country. These exchanges operated independently for decades, each serving their respective regions, but fragmentation hindered efficiency and market development.

    By the early 2010s, the government recognized the need for a unified national exchange. The Stock Exchanges (Corporatization, Demutualization, and Integration) Act was passed in March 2012 and signed into law in May 2012. This act mandated the integration of the KSE, LSE, and ISE, leading to a series of demutualization and restructuring phases. The result was the launch of the Pakistan Stock Exchange Limited (PSX) on January 11, 2016, completing the second phase of the integration process. This merger created a more liquid and efficient market, reducing fragmentation and enhancing transparency.

    The Modern Era: Pakistan Stock Exchange (2016–Present)

    The launch of PSX in 2016 marked a new chapter in Pakistan’s financial history. A significant milestone came in late 2016 when a 40% equity stake in PSX was sold to a Chinese consortium, led by the Shanghai Stock Exchange. This strategic partnership not only brought substantial foreign investment but also facilitated integration with Chinese markets through the China Connect Interface, allowing Chinese investors to access Pakistani stocks and fostering stronger economic ties between the two countries. In June 2017, PSX took another bold step by becoming self-listed, offering 20% of its equity to the general public, aligning with international best practices and demonstrating transparency.

    Today, PSX is a thriving exchange with 524 companies listed on its Main Board and 3 on its GEM Board, representing 37 industrial sectors. The total market capitalization exceeds Rs 9.31 trillion, and the exchange serves over 313,000 investors. Key financial indicators include a Price to Earning Ratio of 3.97 and a Dividend Yield of 9.38%, reflecting the attractiveness of Pakistani stocks for investors. The exchange offers a variety of indices, including the flagship KSE 100 Index, KSE 30 Index, KMI 30 Index, and several sectoral and ETF indices, totaling 16 indices.

    Technological Advancements and Investor Services

    PSX has embraced technology to modernize its operations and enhance investor experience. In 2023, it upgraded its trading system from KATS to the New Trading & Surveillance System (NTS), further streamlining trading processes. Additionally, PSX has introduced several investor-friendly tools and services, including:

    • Online Account and Sahulat Account: Simplifying account opening for retail investors.
    • PSX WhatsApp Service: Providing real-time market updates.
    • My Portfolio: Offering virtual trading for educational purposes.
    • PSX Knowledge Center and Glossary: Educating investors with resources like a glossary of 375 financial terms.
    • Exchange Traded Funds (ETFs): Launching 9 ETFs to provide diversified investment options.

    These innovations have made PSX more accessible and efficient, catering to both retail and institutional investors. Ecosystem partners like the Central Depository Company of Pakistan (CDC) and the National Clearing Company of Pakistan Limited (NCCPL) support its operations, ensuring secure and efficient securities depository, clearing, and settlement services.

    Global Recognition and Awards

    PSX’s commitment to excellence has earned it international acclaim. It has been awarded the Best Islamic Stock Exchange Award for three consecutive years (2021, 2022, and 2023) by the Global Islamic Finance Awards (GIFA). This recognition highlights PSX’s role in promoting Shariah-compliant financial products and services, which are crucial in a country where Islamic finance plays a significant role.

    Regulatory Challenges and Milestones

    Throughout its history, PSX has navigated numerous regulatory challenges. The establishment of the SECP in 1999 was a critical step toward regulating and stabilizing the market, but early efforts faced resistance from entrenched interests. Over time, regulatory reforms have strengthened market integrity, with milestones such as the introduction of share buyback rules in 1999 and the demutualization and integration of exchanges in 2012. However, challenges remain, including market manipulation, volatility, and the need for stricter enforcement of regulations. The SECP’s authority to regulate accountants and impose penalties has been limited, with fines as low as $30 per offense, underscoring the need for stronger deterrents against misconduct.

    Economic Impact and Future Prospects

    PSX plays a pivotal role in Pakistan’s economy, facilitating capital formation for companies and providing investment opportunities for individuals and institutions. With a market capitalization of over Rs 9.31 trillion, it is a key driver of economic growth and development. The integration with the Shanghai Stock Exchange and the China Connect Interface has opened new avenues for foreign investment, positioning PSX as a gateway for global investors interested in Pakistan’s growing economy.

    Looking ahead, PSX is well-positioned to play an even more significant role in Pakistan’s financial landscape. Ongoing efforts to attract foreign investment, improve regulatory frameworks, and leverage technology will further enhance its efficiency and inclusivity. As Pakistan’s economy continues to grow, PSX will remain a vital institution, connecting investors, companies, and markets both domestically and internationally.

    Contact Information and Resources

    For those interested in learning more, PSX’s head office is located at Stock Exchange Building, Stock Exchange Road, Karachi – 74000, Pakistan. Contact details include Phone: +9221 111-001-122, Email: shareholders.affairs@psx.com.pk, and Website: PSX Official Website. Additionally, PSX has a Whistle Blowing Policy available at Whistle Blowing Policy for reporting misconduct.

    Summary Table of Key Milestones

    YearEvent 1947 Karachi Stock Exchange (KSE) established, starting with 5 companies. 1970 Lahore Stock Exchange (LSE) established. 1989 Islamabad Stock Exchange (ISE) established. 1991 KSE 100 Index introduced as a key market benchmark. 1998 Transition to Karachi Automated Trading System (KATS) for electronic trading. 1999 SECP established; Companies (Buy-back of Shares) Rules, 1999 introduced. 2002 Alhamd Textile Mills first to buy back shares under new rules. 2012 Stock Exchanges (Corporatization, Demutualization, and Integration) Act passed. 2016 PSX launched, merging KSE, LSE, and ISE; 40% equity sold to Chinese consortium. 2017 PSX self-listed, offering 20% equity to public. 2023 Upgraded to New Trading & Surveillance System (NTS).

    This table summarizes the major milestones in PSX’s history, highlighting its growth and transformation.

    Conclusion

    The Pakistan Stock Exchange has evolved from a small regional exchange into a nationally integrated market that reflects Pakistan’s economic aspirations. From its humble beginnings as the Karachi Stock Exchange in 1947 to its current status as a modern, technology-driven exchange, PSX has overcome numerous challenges and embraced opportunities for growth. With its strong foundation, global partnerships, and commitment to innovation, PSX is poised to continue facilitating capital formation, ensuring market integrity, and driving economic development in Pakistan.

    Key Citations

  • Inside the Pakistan Stock Exchange Crash: Global Turmoil and Local Impact

    Key Points

    • Research suggests the Pakistan Stock Exchange (PSX) crashed on April 7, 2025, with a 6% drop, leading to a 45-minute trading halt, amid global market turmoil.
    • It seems likely that the crash was triggered by US President Donald Trump’s tariff announcements, causing a global stock market sell-off.
    • The evidence leans toward global recession fears impacting Pakistan, despite its economy showing signs of stability, with low inflation and growth projections.

    Introduction

    On April 7, 2025, the Pakistan Stock Exchange experienced a significant crash, reflecting broader global economic instability. This event, marked by a temporary trading halt, was part of a worldwide market downturn triggered by US policy changes. Below, we explore what happened, why it occurred, and how it fits into both global and local economic contexts.

    Global Context

    The global stock market crash began on April 2, 2025, following President Trump’s announcement of sweeping tariffs, escalating fears of a trade war and recession. This led to significant declines in major indices like the Dow Jones, S&P 500, and Asian markets, with Japan’s Nikkei dropping nearly 8%.

    Pakistan’s Market Crash

    The PSX saw its benchmark KSE-30 index fall by more than 6% or 7,200 points, prompting a 45-minute trading suspension to curb panic selling. Analysts noted that global recession fears, amplified by US tariffs, were key drivers, though Pakistan’s domestic economy had shown recent stability.

    Pakistan’s Economic Background

    Despite the crash, Pakistan’s economy in 2025 was reportedly stabilizing, with inflation at 0.7%—the lowest in 30 years—and projected GDP growth of 2.8%. Increased foreign direct investment and remittances suggested resilience, yet the stock market was vulnerable to global shocks.

    Survey Note: Detailed Analysis of the Pakistan Stock Exchange Crash on April 7, 2025

    Overview of the Event

    On April 7, 2025, the Pakistan Stock Exchange (PSX) experienced a significant crash, with the benchmark Karachi Stock Exchange (KSE) index slumping by 6% or more than 7,200 points. This led to a 45-minute trading halt, resuming at 1:03 pm local time, as a measure to safeguard against panic selling during extreme volatility. The halt was triggered by a 5% decrease in the KSE-30 index from the previous day’s close, utilizing automatic circuit breakers to allow investor reassessment.

    Global Context: The 2025 Stock Market Crash

    The crash in Pakistan was part of a broader global economic downturn that began on April 2, 2025, following US President Donald Trump’s “Liberation Day” announcement of sweeping tariffs. This policy, aimed at economic autonomy and protectionism, heightened tensions with allies and risked a global trade war and recession. It was described as the largest decline since the 2020 stock market crash during the COVID-19 pandemic, with significant impacts across major markets:

    • US Markets: The Dow Jones lost over 4,000 points in two days, with a first-ever back-to-back loss of over 1,500 points. The S&P 500 saw a 10% drop, and the Nasdaq entered bear market territory.
    • Asian Markets: Japan’s Nikkei index dived nearly 8%, triggering trading curbs, while South Korea’s KOSPI fell over 5%. Other markets like Hong Kong and Shanghai were also affected, with declines up to 9%.
    • European Markets: The pan-European STOXX 600 crashed by 5.8%, marking its steepest one-day percentage decline since the COVID-19 pandemic, with the FTSE 100 dropping almost 5% to a three-month low.

    The global market volatility, measured by the VIX, doubled, nearing COVID-19 pandemic levels, driven by fears of recession and retaliatory tariffs, such as China’s 34% tariffs on April 10, 2025.

    Detailed Impact on Pakistan

    The PSX’s crash was directly influenced by these global events, with investor sentiment in Pakistan affected by the domino effect of international market sell-offs. Yousuf M. Farooq, director at Chase Securities, noted the impact of global recession fears, highlighting how the US tariffs sent shockwaves through emerging markets. The trading halt included the cancellation of all outstanding orders, resuming after a cooling-off period to mitigate further losses.

    Table: Key Market Indices Performance (April 3-7, 2025)

    Index Country April 3 Close April 3 Change April 4 Close April 4 Change April 7 Close April 7 Change Dow Jones United States 40,545.93 Decrease −1,679.39 (−3.98%) 38,314.86 Decrease −2,231.07 (−5.50%) 37,965.60 Decrease −349.26 (−0.91%) Nasdaq United States 16,550.60 Decrease −1,050.44 (−5.97%) 15,587.79 Decrease −962.82 (−5.82%) 15,603.26 Increase 15.48 (0.099%) S&P 500 United States 5,396.52 Decrease −274.45 (−4.84%) 5,074.08 Decrease −322.44 (−5.97%) 5,062.25 Decrease −11.83 (−0.23%) Nikkei 225 Japan 34,735.93 Decrease −989.94 (−2.77%) 33,780.58 Decrease −955.35 (−2.75%) 31,136.58 Decrease −2644.00 (−7.83%) KOSPI South Korea 2,486.70 Decrease −19.16 (−0.76%) 2,465.42 Decrease −21.28 (−0.86%) 2,328.20 Decrease −137.22 (−5.57%) S&P/ASX 200 Australia 7,859.70 Decrease −75.00 (−0.94%) 7,667.80 Decrease −192.20 (−2.44%) 7,343.30 Decrease −324.50 (−4.23%) EURO STOXX 50 Eurozone 5,113.28 Decrease −190.67 (−3.59%) 4,878.31 Decrease −234.97 (−4.60%) 4,656.41 Decrease −221.90 (−4.55%)

    This table illustrates the severity of the global crash, with Pakistan’s market aligning with the downward trend, particularly in Asia.

    Pakistan’s Economic Situation in 2025

    Despite the stock market crash, Pakistan’s economy showed signs of recovery and stability in 2025. Research from various sources indicated:

    • Inflation Rate: As of April 1, 2025, inflation was recorded at 0.7%, the lowest in 30 years, according to economic reports.
    • Economic Growth: The Asian Development Bank projected a GDP growth of 2.8% for 2025, driven by positive performances in agriculture (1.15%) and services (1.43%) in the first quarter of fiscal year 2024-25.
    • Foreign Investment and Remittances: Foreign direct investment grew by 20% in the first half of fiscal year 2025, and remittances reached a record $35 billion, reflecting renewed trust in Pakistan’s economic trajectory.

    However, the stock market’s vulnerability to global shocks was evident, as even a stable domestic economy could not shield it from international turmoil. The IT sector grew by an impressive 28% year-on-year, and initiatives like the Roshan Digital Account attracted over $9 billion in inflows, yet the market crash underscored the interconnectedness of global finance.

    Reasons Behind the Crash: Global vs. Domestic Factors

    The primary driver of the PSX crash was global, with the US tariff announcements creating a ripple effect. However, domestic factors may have amplified the impact:

    • Dependence on Exports: Pakistan’s economy, heavily reliant on textile and leather exports, could face challenges if global trade wars escalate, affecting investor confidence.
    • Historical Volatility: Past economic crises, such as the 2022-2024 period, left the market sensitive to external shocks, despite recent stabilization efforts.

    Analysts suggested that while Pakistan’s economy was on a stronger footing, the global market carnage, with US stock futures signaling an 8% fall, overwhelmed local resilience.

    Implications and Future Outlook

    The crash highlights the need for Pakistan to diversify its investment base and strengthen risk management strategies. It also underscores the importance of monitoring global economic developments, as emerging markets like Pakistan are particularly susceptible to international volatility. For investors, this event serves as a reminder to reassess portfolios and consider long-term strategies amidst short-term market fluctuations.

    In conclusion, the April 7, 2025, crash in the PSX was a manifestation of global economic instability, driven by US policy changes, with Pakistan’s market reflecting broader trends despite domestic economic progress. This incident emphasizes the interconnected nature of global finance and the challenges faced by emerging economies in navigating international market dynamics.

    Key Citations