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Importance of Islamic Capital Market – Pakistan Stock Exchange – Part 2

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Importance of Islamic Capital Market - Pakistan Stock Exchange – Part 2

Within Pakistan Stock Exchange there are 3 to 4 other segments through which an investor can invest in any stock through Pakistan Stock Exchange. Besides KMI 30 and KMI All Share index screening there are other aspects that needs to be taken care of while managing an investment fund.

  1. Ready Market: This is the most common market. The settlement of the trade which includes the settlement of the payment by the buyer and settlement of the stocks by the seller usually takes place on the third day. Transaction +2 days is the settlement time. If there is a shariah complaint stock, then an investor can invest through the ready market which is a very common way of investing.
  2. Spot Market: During the book closure period days, a particular companies’ shares is transferred from ready market to spot market where the transaction is settled within the next 24 hours. If the stock is shariah compliant the investee can easily invest through this market.
  3. Futures Market Segment: A futures settlement date is decided usually at the last week of the month. Those futures are called that particular month’s future. From Shariah perspective trading in futures is not allowed because there is an element of uncertainty in it so a Muslim investor cannot invest in the futures counter/market.
  4. Book building process: Once a stock is at the initial phase of issuance for the first time, they are being sold to the potential investor to establish an initial price in the market. If the company is shariah compliant then it is allowed to invest in this stock through book building process.

Details of Islamic Capital Market taken from a webinar presented by: Mr Farhan ul Haq Usmani

Executive Vice President and Head of Shariah Audit

Meezan Bank

 

Written by: Sadaf Sawant
Senior Manager Shariah Advisory

Usmani and Co.
Jamia Dar Ul Uloom, Karachi

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