The benchmark Karachi Stock Exchange plunged by 1375 points or 4.6 percent to 28,037 in the morning trading session, reversing weeks of positive performances that saw it touch a 68-year high.
"In the beginning investors believed that there might be some political reconciliation before the march takes off," said Mohammad Sohail, the head of Topline Securities in Karachi.
"But after the yesterday call of Qadri, panic gripped the investors," he said.
The drop came as the capital of Islamabad braces for protest marches led by cricketer-turned politician Imran Khan and cleric Tahir-ul-Qadri who have vowed to topple the government of Prime Minister Nawaz Sharif.
The two plan to march on August 14 accompanied by tens of thousands of supporters, claiming that last year's general election was rigged.
Both protest rallies will be held on Thursday when Pakistan celebrates its independence day.
"This is the largest ever fall in the stock value in one day as panic grips investors," said Farhan Mahmood, a research analyst at Karachi-based Sherman Securities.
Pakistan's economic outlook has generally improved since the government of business-friendly Sharif came to power.
Foreign exchange reserves have doubled from $7 billion to $14 billion following succesful negotiations with the International Monetary Fund for debt servicing assistance, the sale of bonds, as well as auctions for 3G and 4G licences.
In July, ratings agency Moody's upgraded Pakistan's country outlook to 'stable' from 'negative' citing its improving external liquidity position and commitment to reforms.
COMMENTS (48)
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@Ranjha: Your copy/paste of the names of different stock exchanges prove that Burger Kids are good for nothing, except banging their key boards :)
Mubarak Hoo! Mubarak Hoo...
@H Chaudhry: I absolutely agree with almost everything you just said. But I think you misunderstood my point. My argument above wasn't that KSE is useless etc... My only point was to negate the comment above that investors lost money because of the recent KSE stock depreciation... There is no second opinion on that a healthy stock market is good for the economy of any country.
And KSE of NYSE or NASDAQ or any other stock market are no different in the aspect that their health greatly lies on sentiments, political stability and important news in the country and in the rest of the world.. And my comparison with UK/US market was just to point that out that ANY sort of news that could point toward political instability would send the KSE down and THAT BY NO MEANS SUGGESTS A LACK OF CONFIDENCE OF INVESTORS IN IMRAN KHAN OR QADRI.
As far as taxation is concerned, I agree with you completely that this isn't a good time to increase taxation. But all we want is to ensure proper tax collection at the present tax rates from the major business empires in the state which unfortunately PMLN has failed to improve so far. To be clear on that, I'm absolutely against not letting PMLN complete its tenure... its too early to assess the performance of PMLN in terms of economic growth..
@Arsal
Your point is well taken but there is a fundamental flaw! First and foremost comparing Pakistan economy where there is none to little regulations on monetary transactions vs. USA/UK where there is a lot of regulation.
The stock market in Pakistan is a way for people to use their money and bring it in the market thus creating a flow. The flow in turn let companies grow that are getting this capital for expansion of operations since there is no other way in Pakistan to get cheap capital.
Therefore this cheap capital and resulting growth of business directly impacts common man by affording more jobs. Also, the higher returns that investors are getting is a secondary impact as these people with new found money will circulate money further due to spending weather its in new cars, resturants, cloths, foreign trips etc etc.
compare this to western world, the impacts are similar but not primary since regulations allow for many people to not accumlate huge sums and taxation takes away from such savings. This is not case with Pakistan. While the taxation system is improved, stock market and infrastructre investment are the two only ways to stimulate economy which PMLN is doing right fully so. The economic movement at macro level, allows for government to borrow in international markets at better rates. This is a cycle and please try to understand
Finally, lower taxation for corporations is neither wrong nor right. It is driven by the economic factors in my opinion. This is the worse time to Tax corporation in Pakistan. Tax is cost. The cost takes away from bottom line and thus stalls hiring. Actually, at this time Gop Should give a 10 year Tax holiday to every corporation in the Pakistan or may be 25 years for them to come to Pakistan and invest. These Tax Holidays come with regulations like hiring 90% of workforce locally, train management, contribute to local economies, salaries at decent level. Every company that is looking for long term low cost will try to come to such country.
To do this all you need stability and that is where PMLN government needs help from every one. Things do happen over night and people will not get jobs over night. Free education and Free health care is great but who will pay for it when Government has no money and honest taxation is years away
For sake of Pakistan, let this government complete its tenure, let the stability come in and let some development occur.
@Arsal
Your point is well taken but there is a fundamental flaw! First and foremost comparing Pakistan economy where there is none to little regulations on monetary transactions vs. USA/UK where there is a lot of regulation.
The stock market in Pakistan is a way for people to use their money and bring it in the market thus creating a flow. The flow in turn let companies grow that are getting this capital for expansion of operations since there is no other way in Pakistan to get cheap capital.
Therefore this cheap capital and resulting growth of business directly impacts common man by affording more jobs. Also, the higher returns that investors are getting is a secondary impact as these people with new found money will circulate money further due to spending weather its in new cars, resturants, cloths, foreign trips etc etc.
compare this to western world, the impacts are similar but not primary since regulations allow for many people to not accumlate huge sums and taxation takes away from such savings. This is not case with Pakistan. While the taxation system is improved, stock market and infrastructre investment are the two only ways to stimulate economy which PMLN is doing right fully so. The economic movement at macro level, allows for government to borrow in international markets at better rates. This is a cycle and please try to understand
Finally, lower taxation for corporations is neither wrong nor right. It is driven by the economic factors in my opinion. This is the worse time to Tax corporation in Pakistan. Tax is cost. The cost takes away from bottom line and thus stalls hiring. Actually, at this time Gop Should give a 10 year Tax holiday to every corporation in the Pakistan or may be 25 years for them to come to Pakistan and invest. These Tax Holidays come with regulations like hiring 90% of workforce locally, train management, contribute to local economies, salaries at decent level. Every company that is looking for long term low cost will try to come to such country.
To do this all you need stability and that is where PMLN government needs help from every one. Things do happen over night and people will not get jobs over night. Free education and Free health care is great but who will pay for it when Government has no money and honest taxation is years away
For sake of Pakistan, let this government complete its tenure, let the stability come in and let some development occur. Hope my comment goes through!
@Muslim Leaguer: Yeah that was totally a very logical reply to my comment above. Indeed.
@Arsal: You don't need to write lame excuses to explain your allegiance to the Tsunami, which is nothing less than a catastrophic destruction... Except for a few pseudo-indellectualls, all sane people know the meaning of tsunami & destruction. Investors can smell the tsunami catastroph through its media rants, especially after the alliance with Container-II.
The reason a stock crash (like this one) happens is that the investors sell their securities and leave the market because of lack of faith in the market. The share prices are based on demand and supply, as more investors sell the shares and there are no buyers, the price goes down... but that doesn't mean that 'money disappears'. Yes, money is re-distributed but money does not disappear. Some investors are better off than before and some investors lose money... What I'm saying is that as a whole the investor community doesn't suffer... the businesses suffer because of a crash.
Stock index crashed based on breaking news are not something new. Happens in Pakistan and happens in every other country... A couple of days ago, US Stock market showed the biggest decline in a couple of years just because Obama decided to carry out airstrikes in Iraq... Stock market runs on news and sentiments.
(Did I mention that I'm a PTI supporter? Please keep the assumptions to yourselves)
@H Chaudhry: The only problem with you argument is that tax revenue has, in fact, gone down over the last year. Also, I don't think PMLN has anything to do with the index improving over the last year. The world economy has been improving since last 2-3 years so of course, Pakistan's market was also gonna go up. You can't really blame PPP for the stock market crash in 2008, can you? Because there was a worldwide recession and Pakistan's economy is a part of the international economy!
@Muslim Leaguer: If only you knew how the stock market works! When index goes down, it does not mean investors are losing money... it only means investors are taking their money and selling whatever shares they had... money is re-distributed but not lost! try to make a little sense please.
@MA The better stock market shows improving health of underlying companies that triggers an economic uplift./hiring etc. These things don't happen in vaccum or overnight. The gains amassed by the companies yield more revenue for government in taxes and off course jobs.
Problem with people like you is expecting overnight solutions. What makes you think there will be a stable government every given the precedence. What if there is a new government in 1 year and things are still slowly Improving but another party gets agitation and cycle goes on.
For sake of Pakistan, I hope IK comes to senses.
Index will bounce back once things stabilize i.e. there is a stable govt in charge whoever that may be. Thats how markets work. I remember index shooting up day after Benazir was kicked out. I also remember it going below par value in 1999-2000
All establishments and political parties pulling in different directions for their self-interests is a perfect recipe for disintegration of Pakistan for which no orchestration is required.
@Aamer Khawaja: @Rehan: @Proud Pakistani: Yours and most people's comments reflect typical Pakistani behaviour. Not taking responsibility of their own actions and blame others for their losses. And seiously that doesn't make any difference to me!!
Funnily enough, all those who think that stock index reflect the country's true economic health are delusional. How much 12000 increase in index has helped a common man? I am pretty much sure that your lives are pretty much the same as they were a year ago.
in 2005 there was no political instability, but markets crashed and "small investors" lost over $20 billion...how would you justify that in terms of political sense?
Those small investors are the very people who would go to lenghts to negotiate price when buying groceries. But when it comes to stock investing they think that they can easily double their investment in no time. In real world its called gambling. those who are not ready to put in time and effort to understand how the system works are bound to lose it one day or another. And I have no symapthy for them. For investors, who have studied markets for years big investors leave credible footprints, to adjust their market views.
Both IK and TuQ are injecting their frustration to the general masses. They have invested in Dharnas, Rallies and media so why would they care what happens to KSE or even to Pakistan. And by the way why should they wait till next election? Imran is 68 years now and next election is 4 years later. TuQ has already put all his hard earned dollars into this game, it will take him another 10 years to "earn" this much amount.
God save us from so called Inqilaabiz.
@No No: KSE not KESC...(KSE stands Karachi Stock Exchange) KESC (Karachi Electric Supply Corporation.)..now change with KE.
The Index should crash not fall.
@W.S:
Agreed. What you perhaps forgot to mention is that emerging markets--and most notably, thinly traded and small market cap frontier markets--stocks are driven mostly by sentiment and liquidity which is based on reading the political tea leaves than any real earnings prospects. Excel spreadsheets of company reports produced by the very brokers whose job it is to trade in those companies are useless.
KSE is a big casino, where the odds are always in the favour of the house.
Wonder how the sharea of companies that manufacture containers are doing?
It is known fact that stock market always over reacts to political instability. The efforts of IK cannot be condemned because the stock market has nosedived. The demands of IK are genuine and they are in the interest in the common people of Pakistan. Undoubtedly, the path to achieving those demands will cause some chaos but it is for the overall betterment of the people of Pakistan.
Would you rather live in a country where the stock market is on uptrend but where social evils such as corruption, bad governance and nepotism is rampant?
All hard work by pml no going down the drain by the miscreants who have no regard for rule of law or judiciary???
KSE was 18000 points when Nawaz Sharif became PM in June 2013. It crossed 30000 points in about one year. Now Imran and Qadri want to reverse this index. Dirty politics by dirty Imran and Qadri.
@Aamer Khawaja: As uneducated a remark as anyone could expect. This only represents the lack of trust investors have in govt to tackle the present scenario! Besides, stock market health always depends on political stability in the country which is the reason for this heavy decline in the past few days!
Imran and Tahir ul Qadri should be deported from my country. Their every move is for the destruction of pakistan. They wish that no investment come in Pakistan. They are doing dirty politics full of agitation.
I think this is a short lived shock, it will go up once uncertainty is resolved. In fact, this stock market is not a representative of our economy as we are agro based economy, a small number of companies benefits from the capital they raised via KSE, majority of the small companies and medium size companies are not public.
Isn't this just transfer of wealth than loss of wealth...afterall somebody , somwhere has made money...........
Caveat emptor.........never trust the gelled , back combed bankster in the pin stripe suit. If the stock have tumbled, surely they were overvalued to start with........
Nothing lost, because the common man didn't reap benefit of a booming stock exchange anyways......
After destroying KPK, now Imran wants to destroy the whole country. Biggest shame for Imran Khan. He is worse than Taliban for Pakistan.
KSE will come even more down due to politics of agitation by IK and TUQ. IK is the ex son in law of England. TUQ is a canadian citizen. Both are foreign agents.
TUQ and IK must be hanged publicly to end this drama. All person opposing the government must be hanged. How dare anyone sending the stock market to crash.
Please arrest Imran Khan for destroying the KSE index. He is responsible for this loss.
Ouch, the Sharif Portfolio just contracted 5%!
Time to diversify the equity holdings--Tadawul (Saudi Stock Exchange), Borsa (Istanbul Stock Exchange) and Sensex (Mumbai Stock Exchange) beckon!
May the Standard Deviation be with you!
Imran and Canadian Qadri are responsible for this loss of economy. Both are enemies of Pakistan. Biggest shame for Imran and Qadri.
@No No: My answer is KSE not KESC! Thats probably sufficient to answer your paragraph, especially based upon your knowledge.
@MA: Your friend @No No makes a beautiful case to support that markets do care who's incharge, they didn't come down when elections were "rigged"
@MA I can safely bet that opportunist imran is more greedy then these small investor who we see their live savings wiped out just coz of power hungry khan who is destabilising the country and punishing it just coz he is unable to become pm on his own without looking towards unconstitutional shortcuts
Pakistan economy had stabilised and going upwards after commencement of the military operation in NW and stoppage of bomb blasts in the country. However, PTI along with Qadri are ensuring that this trend is reversed and their own graph goes up thus bracketing them in the same group ie Taliban.
@MA: For your information mr. stock expert or mr technical analyst what ever you are the small investers are more in number than the big gamblers like you as majority of small investers are depending on market for their everyday living, so they can't wait for the market setiments for months to change and invest.
@MA: Markets absolutely care who is incharge. When Narendar Modi won Mumbai Stock Exchange shot up, this is a reflection of business communities sentiments & confidence. How else would the sentiments come out, Dharna? Our sentiments are reflected when we pull out money from the economy, the real sentiments will be reflected at the end of the month when exports & private companies loans show a negative trend or 'sentiment'. Please note, we don't show sentiments through Dharna's we show it through our money.
"Mubarak ho Mubarak ho" next target, lets destroy motorway
@Aamer Khawaja: no not really. markets don't care who is incharge. they are driven on sentiments. anyone who studies markets closely could have unwind his position days ago and let the "greedy small investor" take the hit....
Once IK has compensated the container business from NS wealth he will then cover the losses for KSE stock market with it!
Thank you Imran Khan this is what you want us to see a " new Pakistan ". For God sake let us leave alone we are not interested in your politics.
"...government failed to make any headway...... prompting PTI to go ahead with their planned march...."
Couldn't agree more. The PM is continuously trying to save his throne, not realising he is slowly axing it himself. If me being a naive citizen of this unlucky country can understand that, a man whose been in the office twice before not realising that surprises me.