Karachi Stock Exchange Fiasco

Its been for sometime that the Karachi Stock Exchange has been ‘frozen’ for official trading when on 28th August fearing a massive flight of capital the movers and shakers of KSE set a Floor-Price-Level at 9144.93 points which was the KSE index as of the last trading session on August 27th. The one month embargo was extended even further.

Its been widely reported that many of the stalwarts of our stock market are practically on their knees pleading the government for a bail out plan. As an outsider with little insights on the specifics of this lucrative industry I feel there are two sides to the argument. The investor with some stake in the stock market vehemently advocates the implementation of the bail out package arguing that its geared up confidence building measure trying to prevent the flight of the hefty foreign investor.

While the other side of the argument, advocated mostly by the layperson is to urge the government to focus their attention towards other pressing issues in the country, as they see these stock market goons as gamblers, who enjoyed the rewards in the last three years, and suddenly when the gambling gave way are coming back to ask for more money to help them resume

Admittedly my arguments may only represent a cursory analysis of a very complex problem but I would like to use this opportunity to open this blog for the experts who may help shed light on what is the best solution out of this mess, more along the lines of whats best for Pakistan and not making the rich richer

8 Comments so far

  1. mqpasta on November 4th, 2008 @ 8:38 pm

    pleading from govt to save stock market is ridiculous… it is bcz that the giant want to save them self even without sympathy they did with small brokers…

    just reopen the market! and you people will see the real faces of AKD etc.

  2. hbrehman on November 4th, 2008 @ 11:14 pm

    they have to let the floor go and let the natural forces in the market decide its bottom…. any artificial measure like freezing of the market will only have a negative impact.
    Market cant recover until it has reached its floor….

  3. barristerakc on November 5th, 2008 @ 1:05 am

    So the “KSE Casino” is down after the manufactured growth. It was obvious to start with that the handful of investors of the casino and it’s principal brokers made BIG and I still remember how on the eve of the budget they successfully persuaded Asif Zardari to extend the tax holiday on capital gains for another couple of years. It’s a mafia and they will get what they want despite Shaukat Tareen’s opposition.

    So the index fall from 15,600 to 9,144 and we all know that the market will fall down to around 8,000 when it’s opened again.

    Major brokers like Aqeel Karim Dehdi, Arif Habib Securities, Javed Omar Vohra, Jahangir Siddiqui & Company, Zafar Moti, Elixer Securities, Khadim Ali Shah Bokhari & Company, and several others are clearly found guilty of criminal breaching of “SECP regulations of stock market” is the past and should have been dealt with but nothing was done.

    WHY BAIL-OUT? THE BROOKERS? AND INVESTORS? I personally lost a healthy amount but this is what happens when you invest in a stock market – why should the government come down to offer financial aide? The CRY BABY ATTITUDE of the punters should stop!

    In a Casino – you win some and you loose some. Fair enough!

  4. kaami on November 5th, 2008 @ 1:53 am

    To tell you truth I found the diction used in this post quite sickening. Words like goons and gamblers do not do justice to the great stride this National Institution has taken in the past decade.

    Transformation from heckiling traders on the floor to a fully computerized and regulated exchange in such a short span of time was remarkable. The increase and growth witnessed over the past eight years was not a one off manipulated spike. The index hovered around a megre 800 points in 1999 to a peak of about 17000 pts in 2007-2008, it was one of the strongest performing exchanges in the world. Still after such a crash it is still valued at 9000 pts. During this period the KSE also witnessed an over whelming influx of Institutional Investors attracted by the growth / potential in financial, pharmaceutical, cement, steel, energy and telecom sectors. When I visited Karachi in March 2008 just after the elections, though the time were bad but still my friends at the KSE were hopeful. The index was hovering around 15000 and if conditions improved had the potential to even touch the 18000 mark.

    But Alas, conditions took a turn for worse, first their were some irresponsible statements by Mr. Ishaq Dar, then of course the ensuing instability and question marks after the Musharraf exit snow balled into what we have today. Stock market of any country is a reflection of its economy and its morale. The fools who de-stabilized this country did not realize its very hard to attract both talent and capital, you fire a shot the whole flock will take flight. This is what has happened to this country in a very small span of time, harra kirri has been committed.

    Now coming to the question posed, for me any bail out package might give sustenance but it will not generate enthusiasm. The morale is low and the money has gone to Dubai and far off lands. The educated traders and fund managers are looking for jobs some where else. Right now outlook is not good package or no package.

  5. expat on November 5th, 2008 @ 3:17 am

    Well the new slogan is," Privatise the Profits, Socialise the losses".

  6. balma on November 5th, 2008 @ 8:54 pm

    Good posting from Kaami.

  7. barristerakc on November 6th, 2008 @ 10:42 pm

    Kami Bhai, I agree with Munshi Ishaq Dar’s Role.Munshi Ishaq Dar single handidly costed Pakistan millions of dollars in fines for fudging fiscal numbers and misrepresentation to IMF. This jackass (Ishaq Dar) is another idiot who believes he is a genius given the company (NS &CO) he keeps. On the contrary, events and facts prove that he was and always will be a complete utter failure.

    On 11th October 1999, Pakistan had the following debt ratios:

    External debt: 47.6% of GDP
    Total external debt & Liabilities: 62.5%
    Domestic debt: 49.1% of GDP
    Fiscal deficit/GDP: 6.1%
    Current Account/GDP: -3.2%

    "The persistence of fiscal and external deficits led to accumulation of large domestic and external debt throughout the nineties. The NPV (net present value) of external debt as a % of exports was estimated at 230% in 1998, much higher than the safe limit of 150%"-Dr. Ishrat Hussein

    Foreign exchange reserves stood at $1.6BN with Total debt servicing due as % of FX earnings of 61.4%

    Inflation was above 10%, economic growth had stagnated and fallen to a low 4%, from 6.3% of the eighties.

    Munshi Ishaq Dar apparently bad mouthed so much about the previous government that he created problems for the current government.

    The problem seems not the policies of the current government but the priorities. Anyone heard of the Kenyan-Model?

    I know personally how couple of banks borrowed money at up to 40% mark-up!

  8. barristerakc on November 9th, 2008 @ 4:19 am

    Kalia arrested? any comments…?

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