FINANCE PROJECT on Investing in Stock Market of Pakistan
Introduction of the Topic
The stock market can be intimidating, but a little information can help ease your fears. Let’s start
with some basic definitions. A share of stock is literally a share in the ownership of a company. When you buy a share of stock, you’re entitled to a small fraction of the assets and earnings of that company. Assets include everything the company owns (buildings, equipment, trademarks), and earnings are all of the money the company brings in from selling its products and services.
Why would a company want to share its assets and earnings with the general public? Because it needs the money, of course. Companies only have two ways to raise money to cover start-up costs or expand the business: It can either borrow money (a process known as debt financing) or sell stock (also known as equity financing).
Stock Market
The market in which shares of publicly held companies are issued and traded either through exchanges or over-the-counter markets. Also known as the equity market, the stock market is one of the most vital components of a free-market economy, as it provides companies with access to capital in exchange for giving investors a slice of ownership in the company. The stock market makes it possible to grow small initial sums of money into large ones, and to become wealthy without taking the risk of starting a business or making the sacrifices that often accompany a high-paying career.
Stock Markets in Pakistan
There are three stock markets in Pakistan that are Karachi Stock Exchange (KSE), Lahore Stock Exchange (LSE) and Islamabad Stock Exchange (ISE).
Karachi Stock Exchange (KSE)
The Karachi Stock Exchange Limited (KSE), was a stock exchange located at the Stock Exchange Building (SEB) on Stock Exchange Road, in the heart of Karachi’s Business District, I. I. Chundrigar Road, Karachi, Sindh Province of Pakistan. It is now incorporated in the Pakistan Stock Exchange along with the other two bourses of Pakistan, the Lahore Stock Exchange and the Islamabad Stock Exchange. It is Pakistan’s largest and one of the oldest stock exchange in South Asia by market capitalization, with many Pakistani consortium as well as overseas enterprises listings. Pakistan Stock Exchange also listed among 10 best stock markets in the world in 2015.
According to Bloomberg, the Pakistani benchmark stock market index is the third-best performer in the world since 2009. In June 2015, Khaleej Times reported that since 2009, the Pakistani equities delivered 26 percent a year for US dollar investors, making Karachi the best-performing stock exchange in the world.
Reading-1
The Kot Addu Power Company Limited (KAPCO):
The Kot Addu Power Company Limited (KAPCO) was incorporated in 1996, location in Kot Addu, District Muzaffargarh, Punjab, Pakistan. Kot Addu Power Plant was built by the Pakistan Water and Power Development Authority (WAPDA). In April, 2000, the Company was incorporated as a public limited company. Kot Addu Power Plant produces 1,600 MW of electricity. On April 18, 2005 the Company was formally listed on all three Stock Exchanges of Pakistan.
Reason for buying:
We invested in this company because government is invested in power projects and this sector is becoming secure and stable.
D.M. Textile Mills Limited
D.M. Textile Mills Limited was incorporated on 28th May 1958 as a public limited company in Pakistan under the companies Act 1913 and is quoted on stock exchanges at Karachi and Islamabad. The company is one of the premier manufacturers of textile products in Pakistan, fully equipped not only with the modern machinery and equipment but also professional management and staff. The growth of the company has proved this combination of excellence.
Reason for buying:
The main reason of investing in this sector and company is because Pakistan is famous in textile industries and this industry is much more profitable and stable as compare to others.
Century Paper & Board Mills Limited (CPBM):
Century Paper & Board Mills Limited (CPBM), established in 1984, is Flagship Company of the Lakson Group of Companies – Pakistan. The Company started commercial production in 1990 and established its name as major producer of quality Packaging boards in the country. It has attained a position of Market Leader in Packaging Boards in particular and is considered as most Preferred Supplier to Printing and Packaging Industry
Reason for buying:
We found it well known company so we invested in it.
Agritech (Formerly Pak-American Fertilizers LTD)
Agritech (Formerly Pak-American Fertilizers LTD) was the first Nitrogenous fertilizer plant built in Pakistan. It was commissioned in 1958 with production capacity of 50000 MTPA of Ammonium Sulphate based on indigenous coal & gypsum as raw materials. The capacity was enhanced to 90000 MTPA in 1968.
Reason for buying:
We purchased it because its share prices were low.
Jahangir Siddiqui & Co. Ltd:
Jahangir Siddiqui & Co. Ltd. was incorporated (under Companies Ordinance 1984) in 1991 as public unquoted company. The Company is presently listed on Karachi Stock Exchange. The company is also a corporate member of Karachi Stock Exchange and Islamabad Stock Exchange. JS Group’s principal activities are trading of securities, maintaining strategic investments, consultancy services, underwriting, etc. The company has a long term rating of AA (Double A) and short term rating of A1+ (A one plus) assigned to it by Pakistan Credit Rating Agency. Jahangir Siddiqui & Co. Ltd. and its subsidiary companies are involved in trading of securities, maintaining strategic investments, investment advisory, brokerage, asset management, agency telecommunication, commercial banking, power generation and other businesses. Jahangir Siddiqui & Co posted a profit (after tax) of Rs. 2,352 million in 2012.
Reason for buying:
We saw its previous history, in the past its share prices increased so we purchased its share to get profit.
Reading-2
No selling no purchasing of shares.
Reading-3
Company sold: Kot Addu & Jah Sidd. Comp
Reason for selling:
Its share prices increased in the very next reading, so we sold its shares.
Buying of company: John Phillips & Co Ltd
At John Phillips & Co Ltd we provide a cost-effective, high value solution to meet all of your financial needs. We work hard to get to know you in order to deliver timely, individual advice on how to improve your business and personal wealth. To find out more about how we can help you and your business click here for an overview of our services. To find out more about us click here. To access a wealth of information visit our resource centers or downloads our free fact sheets.
Reason for buying:
Its price was consistent and chances of increment were there, so we purchased its shares.
Sazgar Engg.:
Sazgar is a premier manufacturer of CNG 4 Stroke Auto Rickshaw (3 Wheeler) and Automotive Wheel Rims. With manufacturing facilities based in Pakistan and a Global Dealer Network, Sazgar is leading the market in Pakistan and also exporting to international markets.
Reason for buying:
We found this company good for investment because there was increased trend in share price.
Reading-4
Company sold: John and Philips
Reason for selling:
Company was earning profit, so we sold it.
Buying of company: Baluchistan Wheels:
Baluchistan Wheels:
Located in the industrial zone of Hub about 35 kilometers from Karachi, Baluchistan Wheels Limited was setup in 1980 for the manufacturing of steel wheels for automobiles with technical collaboration of GKN Sankey Limited UK. The plant has a covered area of 16,000 square meters and builds on a land of 97,000 square meters. It has the capability to manufacture diverse range of wheels for passenger cars, commercial vehicles, agricultural tractors and 4×4 vehicles. The company is a corresponding member of European Tire & Rim technical Organization (ETRTO) and its quality management system is certified for ISO-9002 by AIB Vincotte of Belgium.
Reason for buying:
Deference between last highest and current price was very high so we purchased it on assumption of that it will make progress in future.
Reading-5
Company sold: D.M.tex
Reason for selling:
Company was earning profit, so we sold it.
Buying of Company: Fecto Cem
Established at Sangjani, Near Islamabad, the ISO 9001:2000 certified Fecto Cement Limited is Pakistan’s first anti-pollution cement manufacturing plant and also the first of its kind in south Asia. As one of the most integrated manufacturing units in the country, it has a rated capacity to produce 780,000 tons of clinker per annum. Fuller International Inc., USA erected the state-of-the-art technology plant at a total project cost of Rs.2, 104 million. Ever since the start of production, which commenced from January 01, 1990, Fecto Cement has an enviable track record of achieving maximum production with consistency.
Reason for buying:
We found cement industry stable and we expect growth in this company so we buy Facto shares.
Reading-6
Company sold: Fecto Cem
Reason for selling:
In just one reading its share prices decreased from74.41 to 71.91 so we sold it.
Buying of company: Jah. Sidd comp.
Jahangir Siddiqui & Co. Ltd. was incorporated (under Companies Ordinance 1984) in 1991 as public unquoted company. The Company is presently listed on Karachi Stock Exchange. The company is also a corporate member of Karachi Stock Exchange and Islamabad Stock Exchange. JS Group’s principal activities are trading of securities, maintaining strategic investments, consultancy services, underwriting, etc. The company has a long term rating of AA (Double A) and short term rating of A1+ (A one plus) assigned to it by Pakistan Credit Rating Agency. Jahangir Siddiqui & Co. Ltd. and its subsidiary companies are involved in trading of securities, maintaining strategic investments, investment advisory, brokerage, asset management, agency telecommunication, commercial banking, and power.
Reason for buying:
Its shares prices consistently decreasing from last week so we found it profitable in near future, that’s why we take risk and purchased its shares to get profit.
Reading-7
Company sold: Century Paper
Reason for selling:
We were getting loss from its shares prices, so we think to sell its share to avoid more loss.
Buying of Company: Associated Services
Associated Services is located at Hub Chwoki, Vill, Beirut Tehsil Hub, Lasbella District, Hub Lasbela Balochistan
Email: bawanypk@gmail.com
Full name: Associated Services Limited
Previous name(s): Latif Jute Mills Limited (1977)
Status: Listed
Legal Form: Limited Liability Company
Operational Status: Operational
ISIN Code: PK0023601013
Incorporation Date: 1977
Reason for buying:
We found this company profitable in future, so we decided to buy its share.
Reading-8
Closing Balance: R.s 20,049
Profit: Initially we invested R.s 19,969 in the stock market to get the profit and in the end after selling all shares of the companies, our closing balance is R.s 20,049, its mean we got profit of R.s 80 in the end.
Graph or Trend Charts of all the Companies
Returns overall investment
Returns overall investments are R.s 80 and that is a profit which we gained in the end.
Investing in Stock Market Conclusion
You can make a lot of money investing in stocks or trading in the stock market, but it is not something for the new investors. Care must be taken when it comes to stock investments. The investor must have a solid understanding of stocks and how they trade in the market or risk losing money in a volatile type of investment. Learning how to read stock tables or a stock quote is a must if you are planning to be a serious investor in stocks. It is not hard to read a stock quote once you know what the different terms and symbols stand for.
Learning from the project?
We have learned a lot from this project for example we can make a lot of money from investing in stock market. Sometimes we faced loss in investing in stock market but sometimes we got profit. One thing we learn that due to solid understanding of stock market we can make a lot of money by investing in stock market. This exercise of investing in stock market proved beneficial for us.
Recommendations
In this project we invested in different companies and we found Jah. Sidd, D.M. tex and Bal. Wheels are good for short term investment to gain profit and Jute sector is very risky and unpredictable because there is a repaid decrease in Associated Services and we make lose in it within a week. Power sector is stable and good for investment for long term because there are many upcoming projects and investment made by government in this sector which can cause growth in this sector.
Stock Market Review
Overall stock market trend was normal. It’s proved beneficial for us in the end because we got profit of R.s 193 after investing R.s 19,985 in stock market that reached to R.s 20,178 without having a solid understanding of stock market.
Sources;
We took the reading for the project from “Business Recorder”