Corporate Governance Definition: Corporate governance is the relationship between corporate managers, directors and providers of equity, institutions

who save and invest their capital to earn a return. Corporate Governance in Pakistani context: In March 2002, the SECP issued the Code of Corporate Governance under Section 34(4) of the Securities and Exchange Ordinance, 1969 and SECP Act, 1997 Listed companies are also regulated by the stock exchange at which the y are listed Banking companies are also regulated by the State Bank of Pakistan. Need For Corporate Governance 1. Means to meet the increasing demand of investment capital. 2. Enhance the performance of corporations & conformance of corporations to laws, rules and practice 3. Improve competitiveness Mobilization of capital 4. Market mechanism 5. Transparency 6. Accountability 7. To facilitate the agency problems. 8. The corporate governance system specifies the rights of the shareholder under equity Contract. Principles of corporate governance  Rights and equitable treatment of shareholders : Organizations should respect the rights of shareholders and help shareholders to exercise those rights. They can help shareholders exercise their rights by effectively communicating infor mation that is understandable and accessible and encouraging shareholders to participate in general meetings.  Interests of other stakeholders : Organizations should recognize that they have legal and other obligations to all legitimate stakeholders.  Role and responsibilities of the board : The board needs a range of skills and understanding to be able to deal with various business issues and have the ability to review and challenge management performance. It needs to be of sufficient size and have an appropri ate level of commitment to fulfill its responsibilities and duties  Integrity and ethical behavior  Necessary element in risk management and avoiding lawsuits.  Organizations should develop a code of conduct for their directors and executives.  Disclosure and transparency:.  Clarify the roles and responsibilities of board and management.  Verify and safeguard the integrity of the company's financial reporting.  Disclosure of material matters should be timely & balance. Roles & Responsibility of Board of Directors & Managers. Fiduciary Duties. To adopt mission & vision statement, corporate strategy. To issue securities. To make loans. To invest the funds of the company. A Well-Governed Company Mostly outside directors No management ties Formal evaluation of directors responsive to investors' requests for information on governance issues Corporate Governance Models Anglo-American Model, in which all directors participate in a single board. Adopted in America, Britain, Canada & Australia

German Model. In this model, corporate governance is exercised through two boards. Adopted in Germany, Holland, France. The Japanese Model The shareholders & the main bank together appoint board of directors and the president. Corporate Governance Mechanisms & Control There are two types of control mechanisms a. Internal control mechanism b. External control mechanism Internal C.G Controls: Internal control procedures and internal auditors Balance of Power Remuneration External C.G control: External corporate governance controls encompass the controls external stakeholders exercise over the organization. Examples include  competition  debt covenants  demand for and assessment of performance information (especially financial statements )  government regulations  managerial labor market  media pressure  takeovers Systematic Problems of Corporate Governance  Demand for information: In order to influence the directors, the shareholders must combine with others to form a voting group which can pose a real threat of carrying resolutions or appointing directors at a general meeting.  Monitoring costs: A barrier to shareholders using good information is the cost of processing it, especially to a small shareholder. The traditional answer to this problem is the efficient market hypothesis (in finance, the efficient market hypothesis (EMH) asserts that financial markets are efficient), which suggests that the small shareholder will free ride on the judgments of larger professional investors.  Supply of accounting information : Financial accounts form a crucial link in enabling providers of finance to monito r directors. Imperfections in the financial reporting process will cause imperfections in the effectiveness of corporate governance. This should, ideally, be corrected by the working of the external auditing process Securities and Exchange Commission of Pa kistan The Securities and Exchange Commission of Pakistan (SECP) is a government agency whose purpose is to develop a modern and efficient corporate sector and a capital market based on sound regulatory principles, in order to foster economic growth and prosperity in Pakistan. Functions of SECP SECs main functions include: y The Commission is responsible for regulating the securities and any businesses in stock exchange or in other security markets. y Supervising and monitori ng the activities of any central depository and stock exchange clearing house. y Registering and regulating the working of stock brokers, share transfer agents, portfolio managers, investment advisors or anyone associated with security markets. y Registering and regulating the investment schemes. y Regulation of securities market, credit rating companies and related institution. y Promoting investors education and intermediary training. y Conducting audit of Stock Exchanges and other intermediary organization. y Encouraging the development of capital market and corporate sector in Pakistan.

Acquisition of shares and the merger and takeover of companies, Suggesting reforms in the rules and regulation of companies y Administration of company law. y Incorporation of new compan ies and their regulation. y Regulation of insurance sector and administration of insurance law. y Regulation of non banking finance companies such as leasing companies, mutual funds, investment banks etc. y Regulation of pension funds and administration of volun tary pension system rules. y Encourage of foreign investment What is meant by Technical Analysis? Technical analysts believe that the historical performance of stocks and markets are indications of future performance. The field of technical analysis is based on three assumptions: 1.The market discounts everything. 2. Price moves in trends. 3. History tends to repeat itself. Difference between Fundamental & technical Analysis? Charts vs. Financial Statements Time Horizon Trading Versus Investing The Critics Some critics see technical analysis as a form of black magic What are trend line, Trend links & Channels? 1. Trend lines A trend line is formed when you can draw a diagonal line between two or more price pivot points. Trend lines are a simple and widely use d technical analysis approach to judging entry and exit investment timing . Trend lines are used in many ways by traders. If a stock price is moving between support and resistance trend lines, then a basic investment strategy commonly used by traders, is to buy a stock at support and sell at resistance, then short at resistance and cover the short at support. There are three ty pes of trend lines. Up Trend Down Trend Sideways or Horizontal Trend 2. Trend Lengths Long term trend is generally lasting longer than a year. An intermediate trend is considered to last between one and three months. Short term trend lasts less than a month. 3. Channels Upper trend line has placed on the highs and lower trend line place on the lows. The price has bounced off of these lines several times What is the support and resistance level? Support is the price level through which a stock or market rarely falls. A support level is a price level where the price tends to find support as it is going down. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely to continue dropping until it finds another support level. Resistance is the price level that a stock or market ra rely surpasses.
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A resistance level is the opposite of a support level. It is where the price tends to find resistance as it is going up. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely that it will continue rising u ntil it finds another resistance level.

Once a resistance or support level is broken, its role is reversed. Why Volume is Important? It is used to conform trends and chart patterns. Any price movement up or down with relatively high volume is seen as a stronger move than a similar move with weak volume. Types of Charts: y Line Chart

o It represents only the closing Prices over a set time period. o The line is formed by connecting the closing prices over a time frame. The Bar Chart Some of the most popular t ype of charts Advantage is that it shows high, low, open and close for each day

y Candle Stick Chart: There are two parts in the candle  Wick  Shows the high price and low price of the day.  Body  Shows the bullish pattern or bearish pattern. Been around for hundreds of years Often referred to as Japanese Candles because the Japanese would use them to analyze the price of rice contracts Similar to bar chart, but uses color to show if stock was up (green) or down (red) over the day Green is an example of a b ullish pattern, the stock opened at (or near) its low and closed near its high Red is an example of a bearish pattern. The stock opened at (or near) its high and dropped substantially to close near its low y Point and Figure Chart: Somewhat rare Plots day-to-day increases and declines in price. A rising stack of XXXXs represents increases A rising stack of OOOOs represents decreases.

Typically used for intraday charting If used for multi -day study, only closing prices will be used Helps to filter out less-significant price movements allowing analyst to focus on most important trends Used to keep track of emerging price patterns No time dimension Two attributes affecting the appearance of a point & figure chart Box size

Reversal amount Technical Analysis: Chart Patterns Head and Shoulders Rises to a peak and subsequently decline.

Then, the price rises above the former peak and again declines. And finally, rises again, but not to the second peak, and declines once more. The first and third peaks are shoulders and the second peak forms the head. Cup and Handle:

A cup and handle chart is a bullish continuation pattern in which the upward trend is paused but will continue in an upward direction once the pattern is conformed. Double Tops and Bottom s: This pattern signals a trend reversal. These patterns are formed after a sustained trend, and signal that the trend is about to change.

Triangles:

Flag and Pennant : These two are the continuation chart patterns that are formed when there is a sharp price movement followed by a generally sideways price movement. This pattern is then completed upon another sharp price movement in the same direction.

Wedge: It can be either a continuation or reversal pattern.

Similar to symmetrical triangle but this pattern slants in an upward or downward direction, while the symmetrical triangle shows a sideways movement Triple Tops and Bottoms: Triple Tops and Bottoms are another type of reversal pattern These two chart patterns are formed when the price movement tests a level of

support and resistance three times and is unable to breakthrough, this signals the reversal. Rounding Bottom: Rounding Bottom also referred to as a saucer bottom.

It is a long term reversal pattern that signals the shift of downward trend to upward trend. This pattern lasts from several months to several years. Moving Averages: Moving average is the average price of a security over a set amount of time. Types of Moving Averages Simple Moving Average (SMA) Linear Weighted Average Exponential Moving Average (EMA) Simple Moving Average (SMA): The most common method used to calculate the moving average of prices. It simply takes the sum of all of the closing prices over the time period and divides the result by the number of prices and used in the calculation Linear weighted Average:

It is used to address the problem of the equal weighting. It is calculating by taking sum of all the closing prices over a certain time period and multiplying them by the position of the data point and then divided by the sum of the number of the periods. Exponential Moving Average (EMA:

Exponential Moving Average (EMA) uses a smoothing factor to place a higher weight on recent data points and is regar ded as much more efficient than the linear weighted average. It is more responsive to a new information relative to the simple moving average