KSE100Stocks Group FAQ

Volume 1: Information

Compiled by Ali Ahmed

Revision 30

Last modified 200 7 - 02 - 22

mailto:shadesofmundane@yahoo.com.au

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Contents

[ 1] Introduction ................................ ................................ ................................ ....... 7

[1.1] Disclaimer 7

[1.2] Why write this FAQ? 7

[1.3] 7

[1.4] What do the other volumes of this FAQ contain? 7

[2] Yahoo Groups Subscription ................................ ................................ ................ 8

[2.1] 8

[2.2] So how do I subscribe? 8

[2. 3] 8 [2.3.1] ................................ ................................ ............................ 8 [2.3.2] ................................ .............................. 8 [2.3.3] ................................ .. 8

[2.4] 9 [2.4.1] ................................ ................................ ......... 9 [2.4.2] ................................ ................................ ............................... 9

[2.5] 9 [2.5.1] ................................ ................................ ...................... 9 [2.5.2] ................................ ................................ .............. 9 [2.5.3] ng email or posting a message to the group? ................................ ..... 10 [2.5.4] ................................ ........................ 10 [2.5.5] ................................ ................................ ..... 10 [2.5.6] ................................ .......................... 10

[2.6] How do I email/share a file with the group? 10

[2.7] Why am I receiving obscene / virus - infected emails? 11

[3] Shares ................................ ................................ ................................ .............. 12

[3.1] What are they? 12

[3.2] Why would a company issue shares? 12

[3.3] Why would I want to buy shares? 12

[3.4] What are securities? 12

[3.5] Is an investment in the stock market risky? 12

[3.6] Are th ere different types of shares? 13 [3.6.1] What are ordinary shares / common shares? ................................ ............... 13 [3.6.2] What are preference shares? ................................ ................................ ..... 13

[3.6.2.1] What are convertible preference shares? ................................ ................ 13 [3.6.2.2] What are redeemable / retractable preference shares? ............................. 13

[3.6.3] What other instruments are there in the Karachi Stock Exchange? ................. 14

[3.7] So how do I become a shareholder? 14 [3.7.1] Initial Public Offering (IPO) ................................ ................................ ........ 14 [3.7.2] Second Public Offering (SPO) ................................ ................................ ..... 14 [3.7 .3] Trading Market ................................ ................................ ........................ 15 [3.7.4] Investing in unit trusts / letting an advisor handle your money ...................... 15

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[3.7.4.1] What is NIT? ................................ ................................ ....................... 15 [3.7.4.2] Who should consider investing in NIT Units? ................................ ........... 15 [3.7.4.3] What is the minimum investment in NIT? ................................ ............... 15 [3.7.4.4] How do I open an account? ................................ ................................ ... 15 [3.7.4.5] What if I need some or all of my money back? ................................ ........ 15 [3.7.4.6] What is forward day pricing? ................................ ................................ . 16

[3.8] 16 [3.8.1] ................................ ................................ ..................... 16 [3.8.2] - trading of stocks permissible under Shari'ah? .......... 16 [3.8.3] ction which is haram in Islam? ................................ ................................ ................................ .... 17 [3.8.4] ......... 17 [3.8.5] much Zakat am I liable to pay on the stocks I own? ............................ 17

[3.9] What makes stock prices go up and down? 17

[3.10] How do I pick the right stocks? 18

[3.11] Anything I should watch out before I invest? 18

[3.12] 19

[4] Karachi Stock Exchange ................................ ................................ ................... 21

[4.1] 21 [4.1.1] t of all currently listed companies at the KSE? ................................ ...... 21 [4.1.2] ................................ ............. 21 [4.1.3] s of a company? ................................ ................................ ...... 21 [4.1.4] ...................... 21 [4.1.5] sponding company/symbol? ........................ 21

[4.2] What is an index? 21 [4.2.1] What types of indices are there? ................................ ................................ 22 [4.2.2] How is the index level calculated? ................................ .............................. 22 [4.2.3] -100 Index? ................................ ................................ ............... 22

[4.2.3.1] wrong with the current composition of the KSE 100 index? ............. 23 [4.2.4] -All -Shares Index? ................................ ................................ ...... 23 [4.2.5] -30 Index? ................................ ................................ ................. 23 [4.2.6] ................................ ................................ ......................... 24

[4.2.6.1] -30 Index? ................................ ................................ ........... 24 [4.2.6 .2] -30 Index? ................................ ................................ ................... 25 [4.2.6.3] -30? ................................ ................................ ......................... 25 [4.2.6.4] ................................ ................................ ....................... 25

[4.3] What are the stock exchange timings? 26 [4.3.1] -open session? ................................ ................................ .... 26 [4.3.2] t session? ................................ .................... 26

[4.4] How does the KSE defer from other stock exchanges in the world? 27

[5] Trading ................................ ................................ ................................ ............. 28

[5.1] How does trading take place? What is KATS? 28 [5.1.1] What is horizontal processing? ................................ ................................ ... 28

[5.2] How do shares get transferred? What is CDS? 28

[5.3] So what choices do I have in trading? 28 [5.3.1] Ready / T+3 Sett lement ................................ ................................ ........... 29 [5.3.2] Provisional Listing Counter ................................ ................................ ........ 29 [5.3.3] Spot / T+1 Transactions ................................ ................................ ........... 29

[5.3.3.1] Why does a share trade as SPOT? ................................ ......................... 29 [5.3.3.2] ................................ ................................ . 29

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[5.3.4] Futures Contra ct ................................ ................................ ...................... 30 [5.3.4.1] What are the costs involved? ................................ ................................ 30 [5.3.4.2] Where can I get the company names and dates for the futures counter? .... 30 [5.3.4.3] Where can I get the prices for shares in the Futures counter? ................... 30

[5.4] What choices do I have in funding? 30 [5.4.1] Delivery (for cash) ................................ ................................ ................... 30 [5.4.2] ................................ ................................ ............. 31

[5.4.2 .1] What are the charges involved? ................................ ............................. 31 [5.4.2.2] What is 10 days COT? ................................ ................................ .......... 31 [5.4.2.3] What is day trading? ................................ ................................ ............ 31 [5.4.2.4] How much will day trading cost me? ................................ ...................... 31

[5.4.3] What is CFS? ................................ ................................ ........................... 32 [5.4.4] What i s Client Level Netting? ................................ ................................ ..... 32

[5.5] What choices do I have in trading mediums? 33 [5.5.1] How can I trade through a stockbroker? ................................ ...................... 33

[5.5.1.1] Where can I get a list of authorized brokers? ................................ .......... 33 [5.5.1.2] How do I open a trading account? ................................ ......................... 33 [5.5.1.3] How do I buy or sell? ................................ ................................ ........... 33 [5.5.1.4] How much will it cost me? ................................ ................................ .... 33

[5.5.2] How do I trade via the internet i.e. do online trading? ................................ .. 34 [5.5.2.1] What do I need to be able to trade online? ................................ ............. 34 [5.5.2.2] How muc h will online trading cost me? ................................ ................... 34 [5.5.2.3] My online trading account is giving problems. What do I do? ..................... 35

[5.6] What are odd lo ts? 35 [5.6.1] How do I trade in them? ................................ ................................ ........... 35

[5.7] 35 [5.7 .1] ................................ ................................ ....................... 35 [5.7.2] ................................ ................................ ............................ 36 [5.7.3] ................................ ................................ ........................... 36 [5.7.4] ................................ ................................ .................... 36 [5.7.5] ................................ ................................ ................ 36 [5.7.6] ................................ ................................ ................................ ... 36 [5.7.7] ................................ ................................ ................................ ..... 36 [5.7.8] ................................ ................................ ............ 36 [5.7.9] ................................ ................................ ................... 37 [5.7.10] ..large cap stocks? ................................ ................................ ................ 37 [5.7.11] ............................. 37 [5.7.12] ................................ ................................ ............................... 37

[5.7.12.1] ................................ ................................ ................. 37 [5.7.12.2] ................................ ................................ ..................... 37 [5.7.12.3] ................................ ................................ ..................... 38 [5.7.12.4] - limit order? ................................ ................................ .............. 38

[5.7.13] ................................ ................................ ........ 38 [5.7.14] ................................ ................................ ...................... 38

[5.7.14.1] ................................ ................................ .... 38 [5.7.14.2] lose end mutual fund? ................................ ................................ .... 39 [5.7.14.3] ................................ ................................ .................... 39

[5.7.15] -selling? ................................ ................................ ..................... 39 [5.7.16] ................................ ................................ ..................... 39 [5.7.17] ................................ ................................ ................... 39 [5.7.18] ................................ ................................ .............................. 40 [5.7.19] ................................ ................................ .............................. 40 [5.7.20] ................................ ................................ ................................ 40 [5.7.21] ................................ ................................ ....................... 40 [5.7.22] ................................ ................................ .......... 40 [5.7.23] ................................ ................................ .......................... 40

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[5.7.24] ................................ ................................ ..................... 40

[5.8] What is the NCSS? 41

[5.9] What is the CDC? 41 [5.9.1] Are there different types of CDC accounts? ................................ .................. 41

[5.9.1.1] Client accounts (or sub accounts) ................................ .......................... 42 [5.9.1.2] Group accounts ................................ ................................ ................... 42 [5.9.1.3] Investor accounts ................................ ................................ ................ 42

[5.9.1.3.1] Do I need to get a CDC investor account? ................................ ......... 42 [5.9.1.3.2] So how do I get a CDC investor account? ................................ .......... 42 [5.9.1.3.3] How do I deposit physical shares into my account? ............................ 42 [5 .9.1.3.4] How do I transfer shares from one CDC account to another? ............... 43 [5.9.1.3.5] How do I transfer shares from my broker to my CDC account? ............ 43 [5.9.1.3.6] How do I sell the shares from my CDC account? ................................ 43 [5.9.1.3.7] What are the costs involved with a CDC investor account? .................. 43 [5.9.1.3.8] How many people can jointly hold a CDC investor account? ................. 44 [5.9.1.3.9] How long does it take for IPO shares to get into a CDC account? ......... 44 [5.9.1.3.10] ................................ ...... 44

[6] Company announcements ................................ ................................ ................ 46

[6.1] 46 [6.1.1] ................................ ................................ ................ 46 [6.1.2] ................................ ......................... 46 [6.1.3] ................................ ................................ ................... 46 [6.1.4] Where can I get a schedule of future meetings of a company? ....................... 46 [6.1.5] How do I get a list of recently made announcements? ................................ .. 46

[6.2] 46 [6.2.1] ................................ ................................ .................. 46

[6.2.1.1] What deductions are made from the amount of a dividend? ...................... 47 [6.2.2] ................................ ................................ 47 [6.2.3] ................................ ................................ ........................ 47

[6.2.3.1] How much will the right shares cost me? ................................ ................ 47 [6.2.3.2] How do I accept the offer / pay for right shares? ................................ ..... 48 [6.2.3.3] How do I make payment for a partial number of right shares? .................. 48 [6. 2.3.4] ...... 48 [6.2.3.5] Can I buy right shares from the market? ................................ ................ 49 [6.2.3.6] I have lost the right shares I received. What do I do? .............................. 49

[6.3] How do I qualify to receive dividends / bonus shares / right shares? 49

[6.4] When will I receive the dividend / bonus shares as announced by the company? 50

[6.5] How long does it take for shares bought by filing rights shares to be trade d as normal shares? 50

[6.6] 50

[6.7] What do XR, XD and XB mean? 50

[6.8] How do we calculate XD, XR and XB price of a share? 50

[6.9] What impact do bonus shares and right shares have o n the future earnings of a company? 51

[6.10] Why are right shares not favored compared to bonus shares? 51

[7] Stock Analysis ................................ ................................ ................................ .. 52

[7.1] What is technical analysis (TA)? 52 [7.1.1] How about we start with the basics? ................................ ........................... 52

[7.1.1.1] And what would a trading trend be? ................................ ....................... 53 [7.1.1.2] So how do I identify a Market Leader? ................................ ................... 53