Stock market crash in pakistan
Dear reader, please upgrade to the latest version of IE to have a better reading experience. For a country with multiple problems it is amazing to see its stock market declared the best performing in Asia and the fifth best performing market in the world, in The academic belief is that markets are driven by fundamentals and stock prices follow a random path. Similar to a coin toss, stock prices are unpredictable.
In an efficient market one cannot consistently generate abnormal returns using past stock data or publicly available information. In simple words unless one has access to private information one cannot consistently generate above average returns. The return on average will be what is commensurate with the risk of the stock. But the Pakistan Stock Exchange PSX defies all of the above academic beliefs. This then brings us to the question, is this growth due to improvement in fundamentals?
Or is it a speculative bubble of which everyone is aware but it still continues to grow. For a country with an annual GDP growth rate of 4. PSX is a high risk market, with intra-day volatility much higher compared to other markets.
A more realistic method of comparing its performance would be the Sharpe Ratio, which compares the return per unit of risk. For foreigners, the PSX does appear to be a market which consistently generates high returns. As the market is virtually immune to global events, it is ideal for portfolio diversification for those for whom high market risk is not a problem. The PSX is a perfect example of capitalism: Time and again the government uses the stock market as an example of its economic performance.
But where is the trickle-down effect of the stock market? A few individuals use it to multiply their wealth. Has the saving rate gone up? The real estate sector and the stock market are the primary tools for the elite to increase its wealth and whiten black money.
Looking on the fundamental argument: Similarly the all-important discount rate has to be calculated based on the systematic risk beta of the stock.
The whole process can be easily manipulated to produce fundamental values as per preferences. At the end of the day the rating companies are just the inbuilt defence mechanisms of capitalism and the banking industry. Stock Exchanges do not become great based on what the returns are but how do they protect investors from fraud.
If PSE cannot protect it's investors through transparency and strict guidelines for business then it becomes a fraud exchange and there are many in the world. PSX is Casino of rich people because there is no other avenue available for investment in Pakistan.
Real estate biz is down , Gold also. Let us see who will be the last holders of these stocks at the end. UMAR - In a Casino you lose. During the last 30 years PSX has never disappointed investors. In what happened in PSX you cannot isolate it from global circumstances.
Investors suffered losses in developed countries as well. But how long it took to recover that is fantastic. So I do not agree that PSX is Casino. If it were casino why the circle is expanded over decades. So far those who invested from long term point of view have been disappointed. Taimur That's the point.
The markets are overheated. PSX is over-hyped without any underlying fundamentals vis-a-vis the economy and the outlook for the country. The PSX is rampant with inside information, front running, conflict of interest and concentration of wealth in a single community.
Where in the world would you have appointed a senior ex broker with links to the stock community as chairman of the SECP in ? Or links of premier auditing firms to senior brokers who conveniently front run on the basis of leaked accounts days before the results are published?
Pakistan's stock market takes massive hit from spiralling Indo-Pak hostility - The Economic Times
If you need to refresh your memory, please go and google Dr Tariq Hasan ex Chairman of SECP and his report on the stock market crash of All swept under the carpet simply because of "protection of the larger interest"by the then KSE community.
As for the "foreign funds are investing in Pakistan", Short term intra day trading gains are not a measure of a market performance. The litmus test is whether these foreign funds and hedge funds have taken any long terms positions in equities.
Show me 15 companies in which any foreign investor of late as taken a shareholding? The stock market, no matter how well it performs cannot be considered a barometer of economic success. Consider human development index, which is a statistical mix of per capita income, life expectancy, education, and other metrics.
Pakistan ranks at which is pathetic. These statistics play games with us too Rampant corruption is another matter where the country is simply put to shame rightly so. The State fails at providing citizens basic services like education, health, and infrastructure.
And citizens, some due to distrust in the state and many having no moral compass fail at their basic duties of citizenship. There is no concept of citizenship in Pakistan at every socioeconomic level.
Considering all this, stock market is meaningless. With the PSX expected to be part of the EM in a few months, officially, I wouldn't think twice of not just investing your own money but also your neighbor's. But that's just me. For large funds or big institutions' investments, it's better to invest in stocks having higher return than fixed income. I think the author has missed train for investing in PSX. I am an overseas Pakistani and being a CA and CFA, I have never looked for grapevine or inside information but have always invested in fundamentally solid companies.
My returns have been amazing, much better than my investments in the US and in the GCC. Companies like Atlas Honda, Rafhan Maize, Thall Limited, Engro, Cherat Packaging, SPEL, all big banks, and many others - where do you find inside info and speculation Dr Sb? Please do not spread misinformation. Asset values are priced in expectation of future and for optimistics, Pakistan has come a long way in terms of infrastructure development in recent 4 years.
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Is PSX the best stock market in Asia? Dr Ali Khalil Malik Updated Jan 16, With an annual rate of return of around 45pc, should we be proud? Both countries have economic indicators which outperform those of Pakistan. Let me address two important arguments in favour of the PSX. Comments 14 Closed Best Newest Oldest.
Jan 16, Remember the golden rule of gambling: Get out before it is too late. UMAR that is your opinion.
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