KSE on a Royal Decline

The entire city is stunned watching the recent downfall of the Karachi Stock Exchange from being right on top of the world at 12000 points and falling within a brief period of a few weeks landing at its present position today of around 8700 points and dreadfully still heading down at a strong pace.

I am sure there are many investors who have felt the pinch watching this decline. What’s your analysis on the issue, opinion, gossip and controversy, anything that can help us analyze the situation. Don’t flame, but rationally evaluate the problem. And try to answer the million dollar question – when will it stop?

20 Comments so far

  1. sheysrebellion (unregistered) on June 15th, 2006 @ 2:53 am

    As soon as people feel comfortable with the value of the dollar and the worries about inflation are quelled.

  2. agha (unregistered) on June 15th, 2006 @ 6:10 am

    It has to happen, as it was a fake boom presented to the market, if u remember the last fake boom in Mr. Sharif era (1990’s) but that one was a quickie, but this time they really planned the boom and increased the index gradually so local investors get the confidence and come forward to invest, u can imagine in late 90’s worth of market was 55 Billion dollars, nothing has changed much economically in pakistan for last 4-5 years So how do u get the air to fill it up in the boom balloon.

    It is really a tragedy coz some good investors comes to stock markets like karachi start investing like hell and increase the index to sky and then pull out all of their investment in a GO, now all the locals gonna cry that they lost everything in it, but those outsiders made some real good money.

    Now i can also forsee the collapse of Real Estate market as our stocks market is going down.

  3. Poo Poo Head (unregistered) on June 15th, 2006 @ 6:51 am

    I want to invest right now 10K in KSE but do not have enough money, I am sure it would go again, if any one has spare money that he could spare for a year then its a good investment. I guess I could avail zero % APR credit cards .

  4. alias (unregistered) on June 15th, 2006 @ 8:13 am

    Last year in March, it was swift. This year, its slow and painful.

    Heh, I saw a guy’s portfolio fall by 33% in 8 weeks, and that 33% is in tens of millions of rupees for him.

    I’d say it’ll probably last a few more weeks after which everyone will forget it ever happened when the upper 5% locks set in. Just like last year. Besides, it’s results season next month, and with most fundamentally-strong industry giants like ICI 40% down from their highs, it’s hard for people not buy with that bargain.

  5. --- (unregistered) on June 15th, 2006 @ 8:15 am

    Its a classic case of nervous pulling out in anticipation of the June 15th close of business law. Its like the day before Y2k.

  6. Adnan Siddiqi (unregistered) on June 15th, 2006 @ 9:25 am

    Now i can also forsee the collapse of Real Estate market as our stocks market is going down.

    I wish your words come true but it doesnt seem happen in near future.Also gold prices are going high so investors would like to inject their money in gold market.

  7. turab (unregistered) on June 15th, 2006 @ 9:46 am

    this is global correction, plz don’t blame it on KSE alone!

  8. Inspirex (unregistered) on June 15th, 2006 @ 10:02 am

    The correction is undoubtedly massive and with the new locks in place, the market tends to decline gradually. In March 2005, the crash was fast and sharp. 33% out in 3 weeks.

    This time, its sweet and slow. Though market analysts are screaming their heads out to investors to start buying because never have blue chips been so far below fair values and the PE ratios look excellent, but I guess people are just staying away from the markets.

    I know for a fact that 2 brokers had to sell their memberships a total of 20 million each, to settle their liability and i know that almost 3 years ago, a signle embership changed hands and was bought by a consortim for 80 million rupees. Thats a stark difference in terms of value.

    All said and done, it will be back soon.

  9. mansoor (unregistered) on June 15th, 2006 @ 10:27 am

    from what i’ve been hearing.. the actual market value lies somewhere between 7700 to 8500… so it’ll come baq to that…. good comments here.. learned a few things about the market :D

  10. UnholySaint (unregistered) on June 15th, 2006 @ 10:29 am

    I really hope that most of those who commented here arent real investors. Here is what I have learnt is happeneing. KSE and other smaller markets are pseudo economies relying on other bigger economies. To slow those bigger economies down to avoid inflation, the International Banks, from EUR US and ASIA, are raising their rates. They have been able to slow economic growth, job markets, real estate markets, and now there is only one thing they want to slow – comodities. When you seen prices of Oil, gas, metals come down significantly, dont hesitate to jump back into the stock market with whatever you can. And was it last week that the price of gold fell 4~7%? Its only a matter of time that the price of oil to come down back into the 50s range. When that happens, whatever inflation we have seen so far, will reduce, stocks will become attractive.

    My analysis is based on comments from Bernanke, articles of Jeremy Seigel and interviews of Thomas freidman.

  11. mansoor (unregistered) on June 15th, 2006 @ 10:29 am

    oh yea.. one other side effect of the market going down…. Eidhi service gets bz.. a lot of ambulances get parked near the building.. from what i heard of the last crash (march i think?) there was one ambulance leaving with a heart attack patient every couple of minutes…

  12. Mariam (unregistered) on June 15th, 2006 @ 10:35 am

    It is indeed sad news. It was a bubble which sure was created to be burst. After 9/11 many abroad Pakistanis came back or invested forex in stock market and hence rates went up. But due to unstable political situation in Karachi they left to other city or to other country.

  13. Kashif Aziz (unregistered) on June 15th, 2006 @ 10:48 am

    Actually, market always nose dive when the big brokers start to fight each other and small ones got caught in cross-fire. Also, yesterday Mansha group dumped its holding which brought the market down.

    Hopefully things will get stable in couple of days, probably by friday.

  14. Discreet Madness (unregistered) on June 15th, 2006 @ 10:48 am

    Chill ! It will go back up IA and be in full swing by August/Sept when companies start announcing their annual results.

    Did anyone notice that all the stocks that went south did so at hardly any volume, and in the absence of any adverse economic/political news, which leads many of the “informed” investors to the conspiracy/market manipulation theory, being probed into by SECP. The decline is not broad-based, so hold your horses, DO NOT panic-sell, and keep your fingers crossed. There’s nothing “Fundamentally” wrong with the market and therefore it should bounce back soon. And of course, if you’ve got some spare cash, and nerve, invest in some of the banking, and oil stocks … actually anything now is dirt cheap. This advice is obviously with the caveat that investing in equitites is strictly not for the faint of heart. Understand the risks, and be prepared to cut your losses fast, or if you don’t like booking losses, then extend your trading horizon to a couple of years.

    Remember that in the long run, equities will ALWAYS make more money than any other investment. This holds for any market in the world.

  15. OPENEYS (unregistered) on June 15th, 2006 @ 12:32 pm

    OF THE MARKET BUT END OF SEARCH NO RESULT ????????????????????

  16. Concerned (unregistered) on June 15th, 2006 @ 3:27 pm

    Everyone has given very good arguements. I personally believe that the KSE benchmark is 10k and it will come back to that as soon as people realise that the profits are about to be announced.

    And who ever said that the property market is going down has probably never dealt in properties. Property price stabalise, they dont go down.

  17. alias (unregistered) on June 15th, 2006 @ 4:12 pm

    If you really want to know why the March 2005 crash happened, or what probably caused this one too, go to KSE’s website and download “Report of the Taskforce to Review the Stock Market Situation.” in the Update Archives section. Link

    It candidly names all those who were responsible, yet since those people dominate the stock market’s controlling body as well, there’s never any action taken. Smaller investors (those who you see crowded at the KSE building) aren’t really doing anything. They’re just herds of people following any ‘tips’ they can get. Real buyers and sellers are those who make the ‘volumes’ go really up, into hundreds of millions of shares. If even a few make a buy or sell call together, you’ve got a major driver of prices coming in.

    Besides, the KSE-100 index composition is completely FLAWED. 4 stocks out of the 100 have 60% control. If OGDC goes down Re. 1, index is down 20 points, same with National Bank and PTCL. If all three go down Rs. 3, one gets the impression the entire market is going down with minus 200 points. Read “DAWN: OGDC determines KSE index rise or fall”. And BTW, the govt. owns something like 90% of OGDC’s shares.

    Just a cherry from the mountain top.

  18. Inspirex (unregistered) on June 15th, 2006 @ 4:24 pm

    this is the article that started it all!!!
    high time a free float index was implemented…

    abamco guys developed the A-30, then BR gusy came up with brindex….

    KSE is also workin on a sensitive index (the SBP stats dept is in consultation on this too, they looked at the A-30 very closely…)

  19. Tariq (unregistered) on June 15th, 2006 @ 5:45 pm

    Some good insightful comments here. Yesterday’s decline of 545 points was in retaliation to govt’s decision to increase tax on trades. However, in an impressive show of force, SECP has effectively put a stop to short-selling and blank sales, which has obviously reduced volume on the market, but this check will be an effective in stopping brokers from manipulating prices through these methods. So in short, market is looking good from here on.

  20. sheysrebellion (unregistered) on June 16th, 2006 @ 3:52 am

    I think it’s important to remember that most of the markets around the world took a dump when the US Government released data suggesting inflation is on the rise.

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