PAKISTAN - COUNTRY BRIEF

FIRST CAPITAL
EQUITIES
Country Brief| Pakistan
August 2014
PAKISTAN
A Natural Destination for Investment
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES IN APPENDIX II AT THE END OF REPORT.

Bridge b/w South, Central & West Asia
Country Brief| PakistanAugust 2014
First Capital Equities Ltd
Full name: Islamic Republic of Pakistan
Population: 188mn (2014)
Capital: Islamabad
Largest city: Karachi
Area: 796,095 sq km
Major languages: English, Urdu, Punjabi,
Sindhi, Pashto, Balochi
Major religion: Islam
Head of State: President Mamnoon Hussain
Head of Govt: Prime Minister Nawaz Sharif
2
Pakistan

Geo-Strategic Importance
Proximity of great powers:
Located at the junction of Russia and China.
Strong USA interest in the region.
Gateway to central Asia:
Located very close to the oil rich Middle East region and Central Asian states.
Offers access from energy efficient to energy deficient countries.
The proposed Turkmenistan–Afghanistan–Pakistan–India Pipeline (TAPI) highlights the significance.
Significance as a transit economy:
Land locked Afghanistan relies heavily on Pakistan for its reconstruction phase.
Pakistan offers Central Asian region the shortest route of 2,600 km as compared to Iran’s 4,500
km or Turkey’s 5,000 km .
Gwadar port with its deep waters attracts the trade ships of China, Central and South East Asian
countries.
The only direct and shortest link between China and the Middle East.
First Capital Equities Ltd 3
Pakistan
“While history has been unkind to Pakistan, its geography has been its greatest benefit. It has resource rich area in the north-west, people
rich in the north-east”, Stephen Philip Cohen

A Land of Many Splendors
Pakistan

Workforce & Population
 With a population of 188mn people (the world’s sixth most populous country), Pakistan offers both a
competent workforce as well as a lucrative consumer market.
 Boasts of a diverse and rich cultural heritage. Home to the 5,000 years-old Indus Valley civilization,
the Indus plain has always been a melting pot of cultures and civilizations.
 One of the world’s largest youth bulge country. About 41% of the population is aged 14 or younger,
48% is 15–49 years of age and only 11% of the population 50 and older. This young and dynamic
population is considered an omen of prosperity.
 The world’s 10th largest labour force. A large pool of trained and experienced engineers, bankers,
lawyers and other professionals with many having substantial international experience. Around 49% of
the Pakistani population speaks English at least to intermediate level.
 Growing consumerism across Pakistan as reflected by tele-density which has now reached 79% - 5th
largest mobile phone market in Asia.
Pakistan
2004 2104
Total Population (mn) 153 188
Urban Population (mn) 51 73
Rural Population (mn) 101 116
Labour force (mn) 44 60
Un-employment (%) 8 6
Literacy Rate (%) 53 60

Growing Consumerism
 Against the perception of being a hotbed of terrorism and international threat, Pakistan is by large a
moderate, liberal and progressive state. Majority of Pakistanis adhere to moderate Barelvi Islam,
which draws from Sufi traditions.
 31mn internet users. With the recent introduction of third-generation (3G) mobile technology, the
country’s broadband user base is expected to reach between 25 to 45 million by 2020.
 The country is home to 14.4 million Facebook users. Exposure from cable TV and internet in Tier 2
and Tier 3 cities.
 Growing fashion conscious middle-class. Demographic changes, growing urbanization (39%) and
increased social awareness.
 Since 1971, around 7.4mn overseas Pakistanis working/living around the globe. During FY13, FX
remittances amounted to US$14bn.
Pakistan
(10.00) (5.00) - 5.00 10.00
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65+
Male %
Female %
10 5 0 5 10
Population Pyramid FY13

Home to Multinationals
Pakistan

Level of competitiveness
Pakistan
Ease of Doing Business Rank
0
20
40
60
80
100
120
140
160
Kyrgyzstan
Srilanka
China
Nepal
Pakistan
Bangladesh
India
Cambodia
Tajikistan
Iran
Dealing with Construction Permits
Starting a business
0
25
50
75
100
125
150
175
200
Kyrgyzstan
Srilanka
Bangladesh
Tajikistan
Nepal
Pakistan
Iran
China
India
Cambodia
0
25
50
75
100
125
150
175
200
Kyrgyzstan
Bangladesh
Nepal
Srilanka
Pakistan
Cambodia
Iran
India
Tajikistan
China
Protecting Investors
0
20
40
60
80
100
120
140
160
Bangladesh
Kyrgyzstan
Tajikistan
Pakistan
India
Srilanka
Cambodia
Nepal
China
Iran

Pakistan
Trading Across Borders
Regulation
Resolving Insolvency
Credit Market Regulations
0
25
50
75
100
125
150
175
200
SriLanka
China
Pakistan
Cambodia
Bangladesh
India
Iran
Nepal
Kyrgyzstan
Tajikistan
0
20
40
60
80
100
120
140
160
180
SriLanka
Pakistan
China
Tajikistan
Bangladesh
India
Nepal
Iran
Kyrgyzstan
Cambodia
0
20
40
60
80
100
120
140
160
India
Srilanka
Bangladesh
Nepal
Kyrgyzstan
Pakistan
Cambodia
China
Iran
0
20
40
60
80
100
120
140
160
Bangladesh
Nepal
Tajikistan
Pakistan
Srilanka
Kyrgyzstan
India
China
Iran
Cambodia

Pakistan
Judicial Independence
Globalization Index
Price Competitiveness in T&T Industry
Ranking of Happiness
0
20
40
60
80
100
120
140
160
India
Srilanka
Pakistan
Iran
Tajikistan
China
Nepal
Cambodia
Bangladesh
Kyrgyzstan
0
10
20
30
40
50
60
70
80
Iran
Nepal
Pakistan
Bangladesh
Cambodia
India
Srilanka
China
Tajikistan
Kyrgyzstan
0
20
40
60
80
100
120
140
160
180
China
Kyrgyzstan
Pakistan
India
Srilanka
Cambodia
Tajikistan
Bangladesh
Iran
Nepal
0
20
40
60
80
100
120
140
160
Pakistan
Kyrgyzstan
China
India
Bangladesh
Iran
Tajikistan
Nepal
Srilanka
Cambodia

Legislative framework
 The Constitution of Pakistan provides a federal parliamentary system of government, with the
President as the head of the State and an elected Prime Minister as the head of the government.
 The federal legislature is a bicameral Parliament, which comprises the President and the two
Houses, the National Assembly (lower house) and the Senate (upper house).
 The National Assembly is the country’s sovereign legislative body and makes laws for the federation
under powers spelled out in the Federal Legislative List.
 The National Assembly’s constitutional tenure is of five-parliamentary years on the basis of adult
franchise and one person, one vote.
 The National Assembly (NA) consists of a total of 342 members of which 272 members are
publically/directly elected while 70 members (60 women seats+10 non-Muslim seats) are decided on
the basis of overall party representation in the house.
 Almost the same criteria is also used to form assemblies at the provincial levels. Please refer to the
following tables for further illustration in this regard.
Pakistan
National Assembly - Composition
Province / Area General Non-Muslims Women Total
Federal Capital 2
10
2
Punjab 148 35 183
Sindh 61 14 75
KP 35 8 43
FATAs 12 - 12
Balochistan 14 3 17
Total 272 10 60 342
Provincial Assemblies - Composition
Province / Region General
Non-
Muslims
Women Total
Punjab 297 8 66 371
Sindh 130 9 29 168
KP 99 3 22 124
Balochistan 51 3 11 65
Total 577 23 128 728

Legislative framework
 Senate, the upper house of the Parliament, has equal representation from the federating units
balancing the provincial inequality in the National Assembly, where the number of members is based
on population of the provinces.
 The Senate's role is to promote national cohesion and harmony, and work as a stabilizing factor of
the federation.
 The Senate consists of one-hundred and four members, of whom fourteen (14) are elected by the
members of each Provincial Assembly.
 Eight (8) members are elected from the Federally Administered Tribal Areas (FATA), two (2) on
general seats, and one (1) woman and one (1) technocrat are elected from the Federal Capital.
 Furthermore, four (4) women and four (4) technocrats are elected by the members of each
Provincial Assembly.
 Legislation or law-making is the fundamental responsibility performed together by the two Houses of
Parliament, i.e. the Senate and the National Assembly.
Pakistan
Senate - Composition
Province / Area General Non-Muslims
Technocrats/Non-
Muslim
Total
Federal Capital 2 1 1 4
Punjab 14 5 23
Sindh 14 5 23
KP 14 5 23
FATAs 8 - 8
Balochistan 14 5 23
Total 66 17 21 104
4
4
4
-
4

Electoral system
 Election Commission of Pakistan is solely responsible for supervising fair and impartial general
elections and taking appropriate measure regarding functions of administrating the electoral process.
It’s an independent autonomous, and constitutionally established federal institution.
 Meanwhile, a care-taker setup is to be put in place after the dissolution of assemblies. This setup
administrate the government activities during the period when an election for a new assembly is
being held.
 General elections (on both national and provincial levels) are held on the basis of adult franchise,
one person-one vote and the first-past-the-post (FPTP) voting method.
 Since 1970, the country has conduct 10 elections.
Pakistan
Year
A - Voting age
population (mn)
B- Registration
(mn)
C - Total Vote
Cast (mn)
Voter Turnout (C/
B)
VAP Turnout
(C/A)
2008 91.86 79.93 35.61 45% 39%
2002 76.63 71.36 29.83 42% 39%
1997 60.57 54.19 19.06 35% 31%
1993 54.03 50.38 20.29 40% 38%
1990 49.30 47.07 21.40 45% 43%
1988 46.38 46.21 19.90 43% 43%
1985 41.36 32.59 17.25 53% 42%
1977 36.21 30.90 17.00 55% 47%
Average 46% 40%
FCEL Research, International IDEA
2013 110.78 86.20 46.22 54% 42%

Political spectrum, parties & position
Pakistan
Pakistan's Political Spectrum
S.No Party Name Abbrev. Ideological Position Political Base Major Leader
1 Pakistan Muslim League - Nawaz PML-N Centre-Right Mid-to-Northern Punjab Nawaz Shareef
2 Pakistan Tehreek-e-Insaf PTI Centrist KPK, Urban Punjab Imran Khan (the cricketer)
3 Pakistan Peoples Party PPPP Centre-Left Rural Sindh, lower Punjab Asif Ali Zardari/Bilawal Bhutto
4 Mutahida Qaumi Movement MQM Liberal Urban Sindh Altaf Hussain
5 Pakistan Muslim League - Quid PML-Q Centrist Mid-to-Northern Punjab Chaudhry Shujat Hussain
6 Awami National Party ANP Left-wing Khyber Pakhtunkhwa Asfandyar Wali
7 Jama'at-e-Islami JI Right-wing Urban - Scattered Sirajul Haq
8 Jamiat Ulema-e-Islam - Fazal JUI (F) Ultra-right Rural KPK & Balochistan Maulana Fazalur Rehman
2013 Elections: Party Position in National Assembly
Region ↓
Party Name→
PML-N PPPP PTI MQM JUI-F Others Independents Total Representation
Punjab 131 3 7 0 0 5 2 148 43%
Sindh 2 34 1 19 0 5 0 61 18%
KPK 6 0 17 0 4 8 0 35 10%
Balochistan 5 0 0 0 4 5 0 14 4%
FATA/FC 4 0 2 0 1 2 5 14 4%
Reserved Seats
Women 35 8 6 4 3 4 0 60 18%
Non-Muslims 6 1 1 1 1 0 0 10 3%
Total 189 46 34 24 13 27 7 342 100%
Representation 55% 13% 10% 7% 4% 8% 2% 100%

Economic overview
 Agriculture is one of the pillars of the economy of Pakistan, with wheat, cotton, rice, maize and
sugarcane being the major crops.
 Pakistan produces and exports fruit crops including mangoes and citrus. Other main exports of this
country comprise cotton, textiles, leather, apparel and cereals.
 Agriculture accounts for 21% of GDP and 44% of employment. The four sub-sectors of agriculture are;
crop, livestock, fisheries and forestry.
 The industrial sector contributes 21% in GDP; it is also a major source of tax revenues for the
government and also contributes significantly in the provision of job opportunities to the labor force.
 The share of the services sector has reached to 58% in FY14.
 Three main drivers of economic growth are consumption, investment and export. Pakistani
society like other developing countries is a consumption oriented society, having high marginal
propensity to consume.
 During FY14, the private consumption expenditure in nominal terms reached to 80%t of GDP, whereas
public consumption expenditures arrived at 12% of GDP.
 Remittances from overseas workers, averaging about US$1bn per month (or US$12bn/annum) since
March 2011. Ranked 7th in terms of the largest recipient of officially recorded remittances in the
world. After India, Pakistan is the second largest recipient of remittances in South Asian region.
 Amongst 20 countries of the world where remittances cover more than 20% of imports and also
remittances are equivalents to more than 30% of exports.
Pakistan

Main industries by region
Pakistan

Among the top 12 producers in world
Pakistan
2 2 2
3 3
4 4
5 5 5 5
6 6 6 6 6
7
8 8 8 8
9
10 10
11 11
12 12
Oilseeds
BuffaloMilk
BuffaloMeat
Roots
GoatMilk
Cotton
GoatMeat
DryChillies
SugarCane
Okra
Spices
Mangoes
Guavas
Dates
Apricots
Spinach
Chickpeas
Wheat
Pulses
Onions
Cauliflower
Fruit,tropical
Tobacco
Castoroilseeds
CowMilk
Rice
Oranges
Mandarins
Pakistan'srankintheworld
Source: Food and Agriculture Organization of the United Nations

Key Indicators
FY10 FY11 FY12 FY13 FY14E
Real GDP growth (%) 2.6% 3.6% 3.8% 3.7% 4.1%
Agriculture (%) 0.2% 2.0% 3.6% 2.9% 2.1%
Industrial (%) 3.4% 4.5% 2.5% 1.4% 5.8%
Services (%) 3.2% 3.9% 4.4% 4.9% 4.3%
GDP (US$ bn) 176 211 225 236 247
Tax Revenue (PRs bn) 1,473 1,699 2,053 2,199 2,525
Fiscal
Tax/GDP (%) 10.0% 9.4% 9.9% 9.6% 9.9%
Fiscal deficit (PRs bn) 929 1,194 1,761 1,867 1,464
Fiscal deficit as % of GDP 6.3% 6.6% 8.5% 8.0% 5.8%
Exports (US$ bn) 19.7 25.4 24.7 24.8 25.1
External
Imports (US$ bn) 31.1 35.8 40.4 40.2 41.8
Trade Bal. (US$ bn) (11.5) (10.4) (15.7) (15.4) (16.6)
Trade Bal. (% GDP) -6.5% -4.9% -7.0% -6.5% -6.7%
Remittances (US$ bn) 8.9 11.2 13.2 13.9 15.8
Current account (US$ bn) (3.9) 0.2 (4.7) (2.5) (2.9)
Current account as % of GDP -2.2% 0.1% -2.1% -1.1% -1.2%
CPI (%) 10.1% 13.7% 11.0% 7.4% 8.6%
Monetary
M2 growth (%) 12.5% 15.9% 14.1% 15.9% 10.0%
Total FX Reserves - (PRs bn) 16.8 18.2 15.3 11.0 14.1
Exchange Rate (period avg.) 85 86 89 97 103
External Debt (US$ mn) 53,570 57,897 55,862 50,989 51,500
DebtDomestic Debt (PRs bn) 4,651 6,012 7,638 9,520 10,896
Total Debt as % of GDP 62% 61% 62% 63% 61%
Macro
19
Economy

Economic overview
Pakistan
-0.075
-0.05
-0.025
0
0.025
0.05
0.075
0.1
FY08
FY09
FY10
FY11
FY12
FY13
FY14
GDP Industry
Services Agriculture
GDP Sub-Sec Performance
Agri: 21%
Services: 58%
Industry: 21%
GDP Composition
-0.02
-0.01
0
0.01
0.02
0.03
0.04
0.05
FY09 FY10 FY11 FY12 FY13 FY14
Agriculture Industry Services GDP
Supply-side contributions to growth
-10%
10%
30%
50%
70%
90%
110%
FY10
FY11
FY12
FY13
FY14
Pvt consumption Investments
Govt exp Net exports
Demand Side Nominal GDP

Stock Market Overview
 Currently three Stock Exchanges in Pakistan at; Karachi, Lahore and Islamabad
 Karachi Stock Exchange (KSE) is the main bourse with 558 listed companies with combined market
capitalization of US$70bn.
 KSE started operations in 1947 but came into limelight in early 1990s due to financial sector
liberalization. KSE has 200 members. Around 135 are active.
 Approx. 87% of turnover occurs at KSE, 12% at Lahore and 1% at Islamabad
 KSE was previously operating as a non-profit organization with mutualized structure wherein its
Members had trading as well as ownership rights. Now, following the demutualization, KSE stood
corporatised & demutualized as a public limited company by shares with effect from August 27, 2012.
 Financial institutions (Mutual Funds, Commercial Banks, DFIs, etc), Foreign Investors, Retailers and
High net-worth individuals are main players in the market.
 Trading at KSE is screen based through a number of terminals. Each and every trade is recorded.
 There is one depository company in Pakistan (Central Depositary Company). On average, circa 99% of
KSE volume settled through CDC and rest in physical shares.
 Pakistan’s weight in MSCI Frontier (MSCI FM) has increased to circa 7.2%.
 The Karachi Stock Exchange KSE-100 Index is the benchmark for our Karachi market, it comprises of
the top companies from each of the 34 sectors on the KSE, in terms of market capitalization.
 There are two other indices; KSE-30 Index, which is based on free float capitalization of top 30
companies and KSE all shares Index which is based on full market capitalization of all listed
companies at the Exchange.
 The most quoted index is the KSE-100. It comprises of the 100 largest companies on the Stock
Exchange and is updated minute by minute during trading hours.
Pakistan

KSE at Glance
Pakistan
KSE - 5 YEARS PROGRESS 2010-2014
Up to Up to Up to Up to Up to
31-12-2010 30-12-2011 31-12-2012 31-12-2013 04-08-2014
Total No. of Listed Companies 644 638 573 560 558
Total Listed Capital - PRs mn 919,161 1,048,444 1,094,367 1,129,787 1,151,732
Total Listed Capital - US$ mn 10,805 12,169 11,731 11,104 11,271
Total Market Capitalization - PRs mn 3,268,949 2,945,785 4,242,278 6,056,506 6,992,333
Total Market Capitalization - US$ bn 38 34 45 60 70
KSE-100TM
Index 12,022 11,348 16,905 25,261 29,648
KSE-30TM
Index 11,588 10,179 13,764 18,809 20,626
KSE All Share Index 8,359 7,857 11,964 18,664 21,810
New Companies Listed during the year 6 4 4 3 4
Listed Capital of New Companies - PRs mn 33,438 16,011 8,161 4,545 19,871
Average Daily Turnover - Shares in mn 133 97 197 239 232
Average value of daily turnover - PRs mn 4,405 3,506 4,675 7,604 8,988
Average value of daily turnover - US$ mn 52 41 50 75 88
Foreign Investors Gross Buy - US$ mn 1,214 684 936 2,000 1,463
Foreign Investors Gross Sell - US$ mn 688 811 811 1,602 1,102
Source: KSE, NCCPL, FCEL Research

Investing in Stock Market
 Foreign investors are freely allowed to operate in Pakistani capital market without any retention
period.
 There are no restriction on the extent of foreign ownership stake and also no limit for holding the
shares for trading purposes.
 Funds invested in the capital market are freely transferable along with dividend income.
 Foreign investors are treated at par with local investors in tax treatment.
 Dividend tax is 10% (except 7.5% for Power Generation).
 Foreign investors held 8.4% of the total market cap as of Jul 18, 2014. As % of free float, the foreign
holding arrived at 29%.
 Special Convertible Rupee Account (SCRA) is preferable to transfer funds efficiently.
 Settlement System is T+2 for Ready/Cash. Incase of corporate announcement, spot transaction are
carried out on T+1 for specified period.
 Cash settled future is a standardized contract where all settlement occurs purely on cash basis.
Depending on the contract, settlement occurs 30, 60 & 90 days after the contract is purchased.
 Blank sales are not permissible. Short sales can be made if 1) Prior contractual borrowing
arrangement has been made. 2) Sale is made at up tick and 3) Trade is identified as a ‘Short sale’ at
the time of placement of order
 Stock Index Futures Trading is a specified number of contracts whose mark-to-market difference is
settled through National Clearing Company standard pay-in-collect system on daily basis.
Pakistan

Stock Market - Legal framework
 The securities market and the corporate sector are regulated by the provisions of the Companies
Ordinance 1984.
 The Securities and Exchange Ordinance 1969 and Rules framed there under in 1971.
 The Securities & Exchange Commission Act 1999.
 There are also Federal legislations relating to specific areas like
Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970.
Investment Companies and Investment Advisors Rules 1971.
Modaraba Companies and Modaraba (Flotation and Control) Ordinance, 1980.
Companies (Issue of Capital) Rules 1996.
Leasing Companies (establishment and Regulation) Rules 1996.
Asset Management Companies Rules 1996.
Insurance Companies Ordinance 2000.
Guidelines for insiders trading.
 In addition to above, the listed companies are also subject to the Rules and Regulations of the stock
exchanges.
Strengthened Regulatory Regime post 2008 Crisis
Strong risk management system & State-of-the-art technology Platform.
Seamless electronic integration of Trading (KSE), Clearing & Settlement (National Clearing Co.)
and Custody (Central Depository Co.).
Fit & Proper Criteria for brokers; KYC & Anti Money Laundering guidelines implemented.
Universal Identification Number (UIN) for every investor & auto-tagging of CDC sub-account with
the UIN and KSE’s KATS code for investor protection.
Pakistan

Stock Market - Legal framework
Capital gain tax
 The CGT was scheduled to increase from 10% to 17.5% (for less than six months holding period) and
to 9.5% (from 8%) for more than 6 months and less 12 months in FY15 as per Finance Bill 2013.
 For Tax Year FY15, capital gains tax rate has been reduced to 12.5% for securities held for a period
up to 12 months as against prescribed rate of 17.5% and rate of 10% is now applicable for securities
held for a period between 12 to 24 months. Tax on capital gains for securities held for more than 24
months will be exempted.
Current dynamics of KSE
 KSE was Demutualized on August 23, 2012 and turned into a company limited by shares with an
equity base of nearly $80 million.
 The Board of Directors of KSE now has 6 public interest directors nominated by the SECP including
the Chairman, 4 representatives of previous members of the Exchange and the MD.
 Within 24 months of Demutualization 40% stake with management control has to be sold to strategic
investor, 40% will be retained by ex-members/now shareholders and 20% will be IPO’d, as per the
Demutualization Act 2012.
 Strategic investor can only be a (i) stock exchange; (ii) derivatives exchange; (iii) commodities
exchange; (iv) depository company, with 10 years’ experience, US$200million capital & high
reputation.
 As per the Demutualization Act 2012, KSE’s organization has been segregated into separate
regulatory and commercial functions to avoid any conflict of interest.
Pakistan

KSE - Sector Concentration
 The sector concentration of KSE is high compared to the rest of Asia.
 Top 4 sectors – Oil & Gas, Commercial Banks, Food producers and Chemicals make up around 70% of
the total market capitalization.
Pakistan
Sector Concentration at KSE (Aug 6, 2014) Market Cap (US$ mn) % Share
Oil and Gas 20,310 29%
Commercial Banks 15,318 22%
Food Producers 6,877 10%
Chemicals 5,652 8%
Construction and Materials 3,823 5%
Personal Goods (Textile) 3,468 5%
Tobacco 3,353 5%
Electricity 2,023 3%
Others (26 sectors) 10,084 14%
Source: KSE & FCEL Research

KSE - Stock Concentration
 KSE Index is a market capitalization based total-return index of 100 companies.
 Stock concentration follows the similar pattern as that of sectors with largest E&P company, OGDCL
occupies 11% weightage in Index.
 MCB is the 2nd largest company with 9% index weightage.
Pakistan
Top 10 Companies KSE -100 Index Weightage (Aug 6, 2014) Bloomberg Code Weight
1 Oil & Gas Development Company OGDC PA 11%
2 MCB Bank MCB PA 9%
3 Pak Petroleum PPL PA 6%
4 Fauji Fertilizer FFC PA 5%
5 Pak Oilfields POL PA 4%
6 Hub Power Company HUBC PA 3%
7 Lucky Cement LUCK PA 3%
8 PSO PSO PA 3%
9 Engro Corp ENGRO PA 3%
10 United Bank UBL PA 3%

KSE - Top Turnover Stocks
 KSE is a fairly liquid bourse with last 12-months average daily turnover of US$80mn.
 Turnover/Market Cap ratio of 31% in last 12 months.
 Around 40% of volume occurs in 10 stocks. Over the years, this concentration has declined as in 2007
around 50% of volume used to occur in 6 stocks.
Pakistan
Average daily turnover (Jan-Aug 2014)
S. No. Vol (mn) Val (US$ mn) % Share
1 PSO 2.2 8.6 10%
2 ENGRO Corp 3.7 6.8 8%
3 DG Khan Cement 3.9 3.5 4%
4 Pak Petroleum 1.4 3.1 4%
5 Nishat Mills 2.5 3.1 4%
6 Maple Leaf Cement 8.3 2.5 3%
7 National Bank 3.9 2.2 3%
8 Attock Refinery 1.0 2.2 3%
9 Lucky Cement 0.6 2.2 2%
10 EFOODS 2.0 2.1 2%
Company

KSE - Share Free Float
 Free float in Pakistan is circa 29% on average. This is likely to improve as the Government plans to
divest its holdings in listed companies.
 Currently, 12 companies have float adjusted Market Cap of over US$300mn each.
Pakistan
Top Free Float Companies Free Float Mkt Cap Free Float % of Co's Cap
S. No. Company (US$ mn) %
1 OGDC PA 1,697 15%
2 MCB PA 1,356 40%
3 PPL PA 944 21%
4 FFC PA 781 55%
5 POL PA 622 46%
6 HUBC PA 534 75%
7 LUCK PA 507 40%
8 PSO PA 485 46%
9 ENGRO PA 469 49%
10 UBL PA 466 20%

KSE - Improving Float Adjusted Mkt Cap
 KSE size has jumped from US$20bn in Jan-09 to US$70bn in Aug-14. Free float of the market arrives
at 29% (US$20bn).
 Though still lower than avg. emerging market free float, there is a high chance that this will improve
as many secondary offerings/divestments (of state owned enterprises) are in pipeline.
 1 or 2 international offerings a year is possible looking at reviving Pakistan’s acceptability in the
international capital market, thanks to improving economic indicators & effective recovery measures
by the Govt, and improving perception.
 Pakistan current weight in MSCI FM Index is 7.2%. This could improve further inline with the
improving free float of Pakistan market.
 Potential candidate for IPO: PARCO, Lahore Electricity Supply Company, State Life Insurance Corp,
National Insurance Co, Govt Holding (Pvt Ltd).
Pakistan
Company Mkt Cap Govt. Share Current Mkt Px Premium P x with Premium Govt Stake Offered # of shares Total Sale Value
(PRs mn) % PRs/share % PRs/share % mn PRs mn
OGDC 1,140,004 75 265 10 292 10 430 125,400
PPL 448,230 64 227 10 250 10 197 49,305
HBL 279,157 42 190 10 209 15 220 46,061
NBP 127,268 76 60 10 66 15 319 20,999
Total 241,766
Total cash generation of PRs242bn or about: US$ 2,451mn
Potential Realizable Value to GoP From Secondary Offerings to Public

KSE - Market Performance
 Stock market bull run began at the start of 2002 in the wake of GDP growth acceleration,
expansionary Monetary Policy, strong corporate profitability, improved code of Corporate
Governance, risk management measures, political stability and consistent economic policies.
 Average annual gain in last 3 years was 31% (21% in US$). Last 5-year (2009-13) return arrived at 36%
(29% in US$). Last 10-year gain was 26% annually (20% in US$).
 Consistently superior asset class.
Pakistan
-0.75
-0.5
-0.25
0
0.25
0.5
0.75
1
1.25
1.5
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014YTD
PKR US$
KSE-100 - Annual Returns 10-Year average annual return for asset classes
0 0.05 0.1 0.15 0.2 0.25 0.3
Bank Deposits
T-bills
Saving Certificate
PIBs
Gold
KSE
Bloomberg News, November 21, 2012:
KSE 100 Index, the benchmark for Pakistan's equity market, was the top gainer among
72 markets worldwide, when adjusted for price swings in 2012, according to the BLOOMBERG RISKLESS RETURN RANKING.
Over five years, Pakistan's risk- adjusted returns ranked eighth in the world.
Source: KSE, SBP & FCEL Research Source: KSE, SBP & FCEL Research

KSE - Coming full circle
Pakistan
KSE-100 Index
4000
9000
14000
19000
24000
29000
34000
Jan-08
May-08
Oct-08
Mar-09
Jul-09
Dec-09
Apr-10
Sep-10
Feb-11
Jun-11
Nov-11
Mar-12
Aug-12
Jan-13
May-13
Oct-13
Mar-14
Jul-14
Previous All Time High
Apr 18, 2008 (15,676)
Market Floor Oct
09, 2008 (9,181)
Market Low
Jan 26, 2009 (4,815)
Current
Index Aug 06,
2014 (29,383)
Mkt Cap / GDP = 45% Mkt Cap / GDP = 30%
Source: KSE, SBP & FCEL Research

16.1
-48
92
65 70
341
-94
81
36
233
-150
-100
-50
0
50
100
150
200
250
300
350
400
1QCY12 2QCY12 3QCY12 4QCY12 1QCY13 2QCY13 3QCY13 4QCY13 1QCY14 2QCY14
KSE - Foreign Portfolio Investment
Pakistan
Net Flows (US$ mn)
US$ mn Gross Buy Gross Sell
1QCY12 192 176
2QCY12 281 329
3QCY12 223 131
4QCY12 269 203
1QCY13 230 160
2QCY13 898 557
3QCY13 434 528
4QCY13 414 333
1QCY14 554 518
2QCY14 692 459
Source: NCCPL
Foreign Portfolio Investment
Source: NCCPL & FCEL Research

KSE versus Regional markets
Pakistan
Performance during Jan-Dec 2013
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Pakistan
MSCIFM
Vietnam
Malaysia
India
HongKong
Philippines
China
Thailand
Performance during Aug 2013 - Aug 2014 (YoY)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
India
Pakistan
MSCIFM
Vietnam
HongKong
Philippines
China
Thailand
Malaysia
Source: KSE, Bloomberg, FCEL Research
Source: KSE, Bloomberg, FCEL Research

Things to note for offshore investors
 The foreign investors are freely allowed to operate in the capital market without any retention period
 Funds invested in the capital market are freely transferable along with dividend income.
 Offshore investors are treated at par with local investors in tax treatment. If holding period of
securities is under 12 months the final tax liability on capital gains will be 12.5%. If a security is held
for more than 12 months but less than 24 months, tax at 10% would be payable on capital gains.
Securities held for more than 2 years will continue to be exempt from tax.
 Dividend tax is 10% (except 7.5% for Power Generation) , Capital Value Tax is 0.01% (on purchase) and
FED is 0.02% (on sale).
 There is no limit for holding the shares for trading purposes.
 Short selling is allowed on certain conditions particularly the evidence of pre existing interest.
 Cash settled future is a standardized contract where all settlement occurs purely on cash basis.
Depending on the contract, settlement occurs 30, 60 & 90 days after the contract is purchased.
 Special Convertible Rupee Account (SCRA) is essential to operate In Pakistani Equities Market.
Balances held are freely repatriable. Following is required to open SCRA account in Pakistan:
Completely Filled SCRA account
Resolution of Board of Directors to open SCRA along with names of authorized directors
on company’s letter head duly attested by company secretary
Attested Copy of Articles and Memorandum of Association
Attested Copy of Certificate of Incorporation of company
List of Directors with their signatures on letter head and attested by company secretary
Passport copies of directors and authorized personnel attested by company secretary
Undertaking to the bank to debit or credit SCRA subject to receipt of trade instruction
from account holder for buying/selling shares through account maintained with the
broker.
APPENDIX 1

Things to note for offshore investors
 Foreign investors can own up to 100% equity.
 Foreign investors are required to obtain a prior SBP approval to own more than 5% of paid up capital
in banks.
 Shares are transferred on settlement date (T+2) to the buyer, and the buyer pays the seller through
the clearing banks within the same settlement period. This means that transactions done on Monday
must be settled by Wednesday. Settlements of accounts are done in the clearing house through
National Clearing & Settlement System (NCSS), which is a fully automated electronic settlement
system.
Important Websites:
Karachi Stock Exchange (www.kse.com.pk)
State Bank of Pakistan (www.sbp.org.pk)
Securities and Exchange Commission of Pakistan (www.secp.gov.pk)
National Clearing Company of Pakistan Limited (NCCPL) (http://www.nccpl.com.pk/)
Ministry of Finance (www.finance.gov.pk)
APPENDIX 1
KSE TRADING TIMINGS
MONDAY TO THURSDAY
FRIDAY
First Session Second Session
Regular (Pre-Open) 9:15 AM - 9:30 AM 9:15 AM - 9:30 AM 2:15 PM - 2:30 PM
Regular (Open) 9:30 AM - 3:30 PM 9:30 AM - 12:00 Noon 2:30 PM - 4:00 PM
Regular (Suspend) 3:30 PM 12:00 Noon 4:00 PM

APPENDIX II
Analyst Certification
All of the views expressed in this document accurately reflect the personal views of the responsible analyst(s) about any and all of the subject
securities or issuers. No part of the compensation of the responsible analyst(s) named herein is, or will be, directly or indirectly, related to the
specific recommendations or views expressed by the responsible analyst(s) in this report. As of 8 August 2014, First Capital and the covering analyst
do not have any interest in any companies recommended in this research report .
Important Disclaimer
This information and opinion contained in this report have been complied by our research department from sources believed by it to be reliable and
in good faith, but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. All opinions and
estimates contained in the document constitute the department’s judgment as of the date of this document and are subject to change without
notice and are provided in good faith but without legal responsibility.
This report is not, and should not be construed as, an offer to sell or a solicitation of an offer to buy any securities. First Capital Equities Limited
(the company) or persons connected with it may from time to time have an investment banking or other relationship, including but not limited to,
the participation or investment in commercial banking transactions (including loans) with some or all of the issuers mentioned therein, either for
their own account or the account of their customers. Persons connected with the company may provide or have provided corporate finance and other
services to the issuer of the securities mentioned herein, including the issuance of options on securities mentioned herein or any related investment
and may make a purchase and/or sale, or offer to make a purchase and/or sale of the securities or any related investment from time to time in the
open market or otherwise, in each case either as principal or agent.
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”,
“estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”,
“could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and
information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from
those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forwardlooking statements. FCEL
expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after
the date of this publication or to reflect the occurrence of unanticipated events.

Exchange rate fluctuations may affect the return to investors. Neither the company or any of its affiliates, nor any other person, accepts any liability
whatsoever for any direct or consequential loss arising from any use of this report or the information contained therein.
First Capital Equities, their respective affiliate companies, associates, directors and/or employees may have investments in securities or derivatives
of securities of companies mentioned in this report, and may make investment decisions that are inconsistent with the views expressed in this
report.
This research report prepared by First Capital Equities is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule
15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer
registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this
report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All U.S. persons receiving and/or accessing this report and wishing to effect
transactions in any security mentioned within must do so with: Maybank Kim Eng Securities USA Inc. 777 Third Avenue 21st
Floor New York, New
York 1- (212) 688-8886 and not with the non-US Broker Dealer, the issuer of this report.
This report is not directed at you if MKEUSA is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to
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Pakistan Contact Information
Mian Ehsan-ul-Huq (CEO) ceo@firstcapital.com.pk
Pakistan Research Team
Faraz Farooq faraz.farooq@firstcapital.com.pk
Abrar Hussain abrar.hussain@firstcapital.com.pk
Muhammad Rehan Khan rehan.khan@firstcapital.com.pk
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Hayat Khan hayatkhan@firstcapital.com.pk
Pakistan Sales Team
Farooq Habib (COO) farooq.habib@firstcapital.com.pk
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Shahood Javed shahood.javed@firstcapital.com.pk
North American Sales Contact
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First Capital Equities Limited
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