Financial Markets

by

Fahim Akhtar

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Financial markets

A place in which people and entities can trade financial securities, commodities, and other fungible items of value at low transaction cost and at prices that reflect supply and demand.

•Stock markets

•Commodity markets

•Bond markets

•Money markets

•Futures markets

•Insurance markets

•Foreign exchange markets

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Stock market

A place where shares or stocks of corporate organizations listed in exchange are traded

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How stock is listed for trade

You want to expand business, and you need money

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How stock is listed for trade

Borrow from fiend and family

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How stock is listed for trade

Go to banks for borrowing

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How stock is listed for trade

Go to general public

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How stock is listed for trade

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How stock is listed for trade

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Registered company engages in business

with funds generated

Company reports profit quarterly

Earnings and profitability is disbursed amongst

all stake holders including those holding share

during specified time

Company earns more, shares goes up and in

case of loss share sinks

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Company doing good or bad business

Financial results and bright or depressive

expectations

Players go for buying seeing rapid growth or selling

anticipating depressed earnings

New innovative product launched / business explored

Some incentives / taxation affecting stock

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• Listed companies - 570• Market capitalization - 5,154,737.92 (in

millions)• Average Daily Turnover - 263.84 (in million)

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A stock index or stock market index is a method of measuring the value of a section of the stock market

All shares

KSE -100

KSE -30

KMI- 30

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Historical performance Karachi Stock Exchange – 100 Index

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The Federal Board of Revenue has collected Rs 1.26 billion capital gains tax (CGT) from stock exchanges during July-2012 to June 2013 ( approximately 1% of total tax collected in Pakistan)

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• 200 stock brokerage houses,20,000 traders, equity dealers, researchers

• MBA / BBA finance , Marketing, CA, ACCA

• 50,000 professionals with market

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Some international markets

• Dow• Nikkei 225• Hangseng • Sensex • FTSE• Asx 200• DAX

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Commodity market

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Scare precious and energy resources Those controlling desire optimum economic benefits Smart trade of commodity in exchanges

Major chunk of trade in crude and gold

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Crude oil is used to

• Produce a variety of fuels such as gasoline,

diesel fuel, jet fuel and bunker fuel.

• Kerosene

• Fertilizers and bug killers.

• Used in the production of cosmetics, perfumes

• Chief ingredient in the manufacture of synthetic

rubbers.

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Crude oil reserves (in million barrels )

• Venezuela 297,570

• KSA 267,910

• Canada 175,200

• Iran 157,300

• Iraq 140,300

• Kuwait 104,000

• UAE 97,800

• Russia 80,000

• Pakistan 480

Opec formed in 1960 and often controls the prices of oil

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Crude oil trade (in million barrels)

Exporters Importers

KSA 8.65 USA 12.22

Russia 9.67 Japan 5.1

Norway 2.94 China 3.4

Iran 2.52 Germany 2.48

UAE 2.52 South Korea 2.15

Venezuela 2.2 Pakistan 1.55 -1.8

Kuwait 2.15 India 1.69

Nigeria 2.15 Italy 1.56

50 % crude oil consumed is extracted internally in Pakistan

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Jewelry forms two-thirds of annual gold demand. India is the largest consumer in volume terms, accounting for 29% of demand in 2012, followed by China and the USA

Central banks and the International Monetary Fund play an important role in the gold price. At the end of 2011 central banks and official organizations held 23 percent of all above-ground gold

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Gold Reserves in tones

• United States 8,133.5•  Germany 3,391.3 • International Monetary Fund 2,814.0• Italy 2,451.8 •  France 2,435.4• China 1,054.1• Switzerland 1,040.1• Russia 996.4• Japan 765.2• Netherlands 612.5• India 557.7• European Central Bank 502.1• Turkey 445.3• Taiwan 423.6• Portugal 382.5

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Speculators, takes into account economy ,

financial reports and events

There are many future contracts trading like

gold March and crude April

Short selling in futures stabilize the prices

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Gold prices take effect of

• Dollar falling:

• Inflation:

• Economic crisis:

• A fall in gold supply: technical rebound

• US unemployment figures:

• Political concerns, crisis:

• Festivals:

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Historical gold prices

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• Commodities exchange work worldwide

• NCEL is working in Pakistan renamed as PMEX

• There are more than 50 commodity houses facilitating

gold trade

• More than 5000 MBAs employed in this sector many of

them with good compensation package in Pakistan

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• Account in PMEX or international broker

• Variety of gold and crude oil contracts available

• Futures also traded

• Future carry more risk

But than higher the risk, higher will be reward

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Questions

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