HOW YOU CAN INVEST IN PAKISTAN STOCK MARKET

 

With Crude on the decline again, trade wars in full swing, the Pakistani Rupee at an all-time low and perceived political uncertainty. 2020 post pandemic the investors have begun questioning themselves – is this the right time to invest in Pakistan Markets?

My answer to this question is an unequivocal Yes!

Let’s begin by admitting that these are real risks. They are now a part of the daily drill, on the electronic and print media alike. These economic headlines have made it to the front page of the normal daily papers. They are, therefore, discounted. Some of these factors may get worse, but it’s not an issue in the longer run. If you wait for the current crop of problems to get over, a fresh set of problems will crop up. So you will never get a perfect time to invest. You risk missing the wood for the trees.

Things NRP’s should consider while investing in Pakistan. Just as you ponder over the current risks, the Pakistan economy is on the move, each passing minute despite global recession and slows down. Our exports growing steadily & pressure on Current Account has almost reduced substantially. We are the world’s 6th largest population country. Labor cost remained competitive as compare to regional India and China & relatively low wages. We are a young country with an average age of around 25 years. Pakistan offers one of the youngest workforces in the world. Emerging middle class of over 80 million people a large number considering that is already the population of Germany alone. Improved infrastructure after CPEC aiming improved connectivity with the region has made Pakistan in the Centre Stage. Additionally, Pakistan has become one of the world’s fastest growing retail markets. One reason which attracts shoppers in spending is a better security environment.

Many factor that entices NRPs to invest in Pakistan Stock Market for better returns and growth prospects. NRP’s investments are allowed in Pakistan stock market through an entirely digital and online process without any need to visit a bank branch, embassy, or consulate. The customer can choose either foreign currency or rupee dominated account, or both. Funds in these accounts will be fully repatriable, without the need for any regulatory approval.

Non-Resident Individual Pakistani, Pakistan Origin Card holders & Employees or officials of the Federal or Provincial Governments posted abroad are eligible to open Roshan Digital Pakistan Account. NRPs can visit any of the designated bank’s online portal for Roshan Digital Account and submits details for due diligence.  After due process of opening bank account, the bank will provide NRP the option to select “Investment in Stock Market” on your bank’s portal / website /app. With the following three further steps, you can start investing in Pakistan Stock Market through Roshan Digital Account:

1. Click on the ‘Consent’ tab to share Roshan Digital Account details with Central Depository Company (CDC) and other Capital Market entities
2. Click ‘I Agree’ to Terms and Conditions for Investing in Pakistan Capital Market
3. Select broker just like AZEE Securities as your preferred broker.

Subsequently, the brokerage house will perform their own due diligence and confirm to NRP and CDC regarding the opening of the Trading Account (CKO is exempted for all such accounts) within 24 hours/one business day. The acknowledgement mail from CDC and if your information/credentials were found complete and correct, you will receive an Account Opening Package email from CDC, comprising of the following actions and details:

1. Opening of your Trading Account with Stock Broker.
2. Creation and Registration of your Unique Identification Number (UIN).
3. Opening of your Custody Account (CDC Account).
4. Activation of Direct Settlement Service (DSS) in your Investor Account (if you have opted for the same).
5. Creation of your CDC Web Access Login ID and Password

 

Before you initiate your first trade, you have to initiate a Fund Transfer request from your Roshan Digital Account to CDC Bank Account maintained with your bank (details of which were provided with the Account Opening Package). For more details AZEE Securities has the help desk +9221-111-293-293 or drop an email nrp@azeetrade.com . 

The NRP can also make use of online portals to their investment strategy. Learn about share market terminologies, basics of stock market, trading requirements and all you need to know about Pakistan Stock Market at Knowledge Centre for NRPs.

Pakistan Stock Market is very alluring for NRP investors as Pakistan is poised to grow steadily over the next three years. Pakistani market offer good returns as well as give sense of satisfaction for NRP by providing an opportunity to help their homeland grow further. 

NEVER TRADE POSITIONS LARGER THAN YOU CAN AFFORD

 

 If you look at the history of trading disasters in the world, one common thing you will come across is tend to trade much beyond the risk that they could take on. Making mistakes is part of the learning process when it comes to trading or investing. Investors are typically involved in longer-term holdings and will trade in stocks, and other securities. Traders generally buy and sell stocks, hold those positions for shorter periods, and are involved in a greater number of transactions.

RISKS OF TRADING MORE THAN YOU CAN AFFORD:

Every Investor with limited capital and hence capital protection becomes the primary focus of every investor. Do not lose sight of your risk tolerance or your capacity to take on risk. You obviously cannot protect your capital if you recklessly take positions in the market. For example, if you are trading futures market then taking 5-6 times leverage with tight stop losses is understandable. However, if you leverage to the tune of nearly 10 times then you are running a huge risk that you cannot afford. Even a 2% movement can have almost impaired half of your total capital available for trading. Things can get worse in trading if you are also going to add overnight risk to your trading portfolio. When you carry forward positions to the next then there are lots of developments in the US, European and Asian markets that could make the trade go against you. In fact, if you are adding overnight risk to your trading portfolio then you need to get a lot tighter in your risk management. Limit the risk that you take on your positions.

5 WAYS TO KEEP YOU’RE TRADING POSITIONS IN CHECK…

 

1.      Even at the risk of repetition it needed stop losses must for every trade. Not just as an afterthought, but stop losses must be part of your order on the trading screen.

2.      Another method is to keep limits on losses on a daily basis. This can vary based on the size of your capital and how much you can afford to take, but it is the discipline that is important. For example, on a trading capital of Rs.5 lakh, you have a 5% limit of losing maximum of Rs.25,000 in a single day. At that point, you must have the discipline to shut down your trading terminal and stop trading for the rest of the day.

3.      The third discipline pertains to how much capital you are willing to lose. This is important because every trader starts off with limited capital. It does not matter whether the trader is a small trader, or George Soros. Capital is finite, though the quantum may differ. The focus must be on deciding at what point of capital loss you will get back to the drawing board and rethink your strategy.

4.      Always attribute a cost of capital into your trading account. If you keep idle money in your trading cost, it has an opportunity. At least it can earn 7% in a liquid fund. Take that as your opportunity cost and keep that in your calculations when you calculate your capital risk. Your situation becomes a lot clearer.

5.      Base your risk on the profit you make. For example, once you have made profits on your trade, you can classify that into core capital and earned profits. You can take a higher risk on earned profits and lower risk on core capital. This will ensure a more even distribution of risk.

 

If you have the money to invest and are able to avoid these mistakes, you could make your investments pay off; and getting a return could take you closer to your financial goals.

With the stock market's partiality for producing large gains (and losses). As an individual investor, the best thing you can do to keep your portfolio for the long term, that you are comfortable with and willing to stick to.

How to Find Shariah Stock Investment

Investing is one of the most discussed topic for everyone, most of Muslims have the added challenge of ensuring of their investments are Shariah compliant. The strict prohibition of interest in Islam makes many conventional investment limits to observant Muslims. Shariah based stock investment is in accordance to the requirements of Shariah laws and the principles of Islam.

There are three basic rules which needed to be adhered to investment from the standpoint of Shariah.

1.      Absence of interest

2.      Potential for ‘unethical concerns’ in the investment mix.

3.      Nature of the contract between the parties involved.

Basics of Shariah based Stock Investment:

For an investment to be HALAL, it must be in equity instead of debt. Investing in equity means having partial ownership by buying shares of the company,  instead investor giving a loan and getting paid interest regardless of how the company does, with equity, the investor shares in the profit if the company does well and shares in the losses if it does poorly. 

The most common way to get equity of a company is to buy its shares on the stock market.  Not every company who is offering its equity through selling shares in the stock market represents a HALAL Investment though. Strictly no investment also in the stocks that engage in short selling and the use of leverage products is Shariah Compliant.    

Shariah based Stock Investment in Pakistan:

If you have the means and the capital, and you really wanted to invest in Pakistan Stock Market, but how do you ensure that your investments are Shariah compliant? Fortunately, Pakistani investors need not to remain concerned anymore, which stocks pass the filter of Shariah compliance.

KSE Meezan Index (KMI-30) is Islamic stock market index in PSX – Pakistan Stock Exchange. In Pakistan thirty companies that have been screened for Islamic Shariah Criteria.  The index was introduced in 2009 and recomposed last from Jan 2018 with the guidance of qualified and well reputed Shariah experts when Shariah compliance of stocks is done.

A stock market index is a measurement of the value of a certain section of the stock market.  What Muslim investors want to know is not the value of that index or how that value goes up or down, but exactly which companies are included in the Islamic index. Even today Pakistani’s or across the world Investors can access Azeetrade.Com a division of AZEE Securities online trade app developed which tells you all the index watches of Shariah Compliant Stocks. Company's stock symbol in the trading app's function will pull up all the list of stocks.  

Such resources make it much easier for Muslims to invest with peace of mind knowing that their investments are Halal.

Want to trade in Stock Market? Know the basics of Technical Analysis

It’s important to learn about the basics first before explore the world of the technical analysis of stocks. Technical analysis can help you make sense of the way investor behavior drives market prices. No matter how much technical analysis basics research that someone does, there is absolutely no way that anyone can predict what a stock is going to do. You can only predict what is probable to happen, based on the indicators, and then trade what is happening.

Technical analysis is an art of using historic price movements of a stock/index to get direction of future price trends. More than absolute prediction it aids traders to get an indicative on price of a stock/ index in short term.

The stock market is a collection of traders and computers from around the world that are buying and selling stocks.  Every trading decision that traders make leaves a digital footprint. This footprint forms a chart patterns such as bull flags, bear flags, ascending triangles, and many more other patterns. Sometimes there will be multiple patterns within patterns! 

The following parameters are used for analyzing charts:-

Price:  The market price is the current price at which an asset/share/commodity can be bought or sold. It is the highest amount a buyer is willing to pay for a particular stock.

Volume: Volume is one of the most basic and most beneficial parameter to understand while reading a stock/index chart. Volume is the total number of shares traded in a particular stock throughout a specific time. A drastic change in traded volumes can indicate a rise or a fall in prices.

Trend: After volume, trend is the second most essential tool for a trader. A combination of trend and volumes aids the trader to decide on whether to enter or exit a particular trade. Trend is basically classified in three types, uptrend, downtrend and sideways trend or consolidation.

Trend-line: The oldest and easiest way of determining the trend is with a "trend line." All that is required is two support points to draw an uptrend or two resistance points to draw a downtrend.

Support level: is the price around which previously, a particular security/commodity finds incremental demand. Traders use this level to enter the stock.

Resistance level: is a price around which a stock finds incremental sellers. Traders use these levels to exit a long position or even short sell a security.

Understanding Stock Quotes:

Investing wisely is something everyone would like to do. Once you open online trading account complete your KYC on-boarding formalities, you are good at trade in the stock market. You can trade online from the convenience of your home, if you have activated your account. Here is one term you frequently hear with respect to the stock market one must know before you start trading.

Stock Prices & Quotes: 

The typical stock quote contains more information than just the current market price per share. It often reveals where the price has been in the past and where it might be heading in the future. A quote can also help the analyst to understand the current stock price relative to historical prices.

To make trading easier for the investor, every stock quote contains a set of standardized information.  They disclose both the current trading price for a stock as well as a stock's bid and ask prices.

Bid Price of a Stock:  the price that someone has offered to pay for a stock.

Ask Price of a Stock:  the price at which a holder of a stock is willing to sell that stock.

One of the purposes of a stock exchange is to match buyers with sellers.  Beyond the current price of a stock, there are two more elements that usually accompany the quote, the most recent price relative to the prior day's closing price, and the percentage change in price from the prior trading day.

An investor or any Institution can access Financial Portal by AZEETRADE.COM a division of AZEE Securities provides additional information along with a stock quote such as historical price data.  This may include the daily high and low, the 52 week high and low, as well as the previous close and the day's opening price.

Daily High and Low:  the highest and lowest selling prices for a stock during the current trading day.

52 Week High and Low:  the highest and lowest selling prices for a stock over the previous 52 weeks.

Previous Close:  the price of the stock at the close of the previous trading day.

Opening Price:  the price which was paid for the first shares of stock traded on the current trading day.

By understanding the historical price information relative to the quoted stock price, investors can, at a glance, get a better feel for where the stock is trading relative to the recent and distant past. 

What are the Budget expectations for Stock Markets?

Budgets and stock markets have had a long relationship. Normally, Stock markets tend to overreact to budget incentives. The proposed Budget 2018-19 may not have been hugely positive for the Stock Markets in policy terms. However, the markets will be looking for reforms related and a few tax-related triggers.

This may sound a bit strange but this budget could give a thrust to equity as an asset class. By focusing on reforms and the benefits of corporatization, the government has continued its pressure on non filers and non documented assets to bring into documented fold. That puts Stock Market at an advantage. Pakistan Stock Market - PSX performed exceptionally well to reach an all-time high of 53,124 points in May 2017 from 19,000 in May 2013 and its market capitalization reached almost $100 billion in 2018. However we witnessed a steep decline of more than 30% as a result of political ripple effects and implications of macro economic challenges. Also, the higher fiscal deficit is likely to be negative for stock market, which have already been going up sharply in the last few months. With current account likely to be under further pressure, that is the negative vote but look at the positive side. The massive allocations/incentives for agriculture and reforms initiatives are likely to have a multiplier effect on GDP growth. This is a lot more value-accretive for Stock Market. So at a macro level, Stock Market really do not have reasons to complain.

Stock Market Specific Measures:

·         With Holding Tax on issuance of bonus shares has been abolished.

·         Super tax to be reduced by 1% each year from FY19 onwards.

·         Corporate tax to be reduced by 1% for FY19 and will be reduced by 1% annually till FY23 for Non-Banking companies.

·         Tax on undistributed profits has been reduced to 5% from 7.5%. Moreover, condition of distributing 40% after tax profits has been relaxed to 20%.

·         Tax of 0.02% on commission earned by brokers has now been made adjustable, compared to previous.

All in all the impact of the Budget FY2018-19 on equity market would be 'Positive', while CGT and tax on dividend maintained. Overall Fertilizer, Textile and chemical to benefit while Banks, Oil & Gas to remain neutral and Auto and Cement to likely remain affect.

It is hard to say which way market sentiment would drive the Stock Market in current fragile political environment. But it needs to be underscored that this budget is significant in more ways than one!