PSX Glossary

• Bear : An investor who anticipates a falling market and, therefore, sells the security in the hope of buying it back at a lower price.
• Blue Chip : A large well-established company with a history of profitable operation.
• Bonds : Fixed-income securities, which entitle the holder to a pre-determined return during their life and repayment of principal at maturity.
• Bull : An investor who anticipates a rising market and, therefore, buys the security in the hope of selling it later at a higher price.
• Capital Gains Tax : Tax payable on profit arising from appreciation in value of investment, realized at the time of selling or maturity of investment.
• Carry-over Trades : Equity repurchase transactions, better known, as "Badla"; these are an established form of transactions used in the stock market for temporary financing of trades by speculators and jobbers.
• Dividend : That part of a company’s profits which is distributed among shareholders, usually expressed in rupee per share or percentage to paid up capital.
• Earnings per share (EPS) : A profitability indicator calculated by dividing the earnings available to common stockholders during a period by the average number of shares actually outstanding at the end of that period.
• Equity : The owners’ interest in a company’s capital, usually referred to by ordinary shares.
• Floatation : The occasion when a company’s shares are offered on the stock market for the first time.
• Fund managers : A company, which invests and manages investors’ money, with the aim of maximizing capital growth.
• Initial Public Offering (IPO) : The offering of equity shares of a company to the general public for the first time.
• Insider trading : IThe purchase or sale of shares by someone who possesses ‘inside’ information on a company’s performance which information has not been made available to the market and which might affect the share price. In Pakistan, such deals are a criminal offence.
• Investment companies : A company, which issues shares and uses its capital to buy securities and shares in other companies.
• Listed company : A company whose securities are admitted for listing on a stock exchange.
• Long position : When an individual purchases securities of a company he is said to have a long position in the company’s shares. For example an owner of shares in PTCL is said to be "long PTCL" or "has a long position in PTCL." If you are long, you would like the share price to go up.
• Market capitalization : The total value of a company’s equity capital at the current market price.
• Nominee : A person or company holding securities on behalf of others, but who is not the owner of such securities.
• Option : The right (but not the obligation) to buy or sell securities at a fixed price within a specified period.
• Ordinary shares : The most common form of shares, which entitle the owners to jointly own the company. Holders may receive dividends depending on profitability of the company and recommendation of directors.
• Portfolio : A collection of investments
• Price/earning ratio (P/E ratio) : The P/E ratio is a measure of the level of confidence (rightly or wrongly) investors has in a company. It is calculated by dividing the current share price by the last published earnings per share.
• Primary market : Where a company issues new shares, either for the first time, or at the time of issuing additional securities.
• Privatization : Conversion of a state-owned company to a public limited company (plc) status.
• Private company : A company that is not a public company and which is not allowed to offer its shares to the general public.
• Public limited company (plc) : A company whose shares are offered to the general public and traded freely on the open market and whose share capital is not less than a statutory minimum.
• Rights Issue : The issue of additional shares to existing shareholders when companies want to raise more capital.
• Securities : A broad term for shares, corporate bonds or any other form of paper investment in capital market instruments.
• Settlement : Once a deal has been made, the settlement process transfers stock from seller to buyer and arranges the corresponding exchange of money between buyer and seller.
• Short Selling : The act of borrowing stock to sell with the expectation of price reduction with the intention of buying it back at a cheaper price.
• Stockbroker : A member of the stock exchange who deals in shares for clients and advises on investment decisions.
• Stock Market : The market place where shares of publicly listed companies are bought and sold.
• Unit trust : An open-ended mutual fund that invests funds in securities and issues units for sale to the public. It can repurchase these units at any time.
• Yield : The aggregate return earned on an investment taking into account the dividend/interest income and its present capital value.