Don’t misread market momentum, says LSE MD
Chaudhry voices concern over heavy trading in low-tier stocks
Chaudhry voices concern over heavy trading in low-tier stocks. PHOTO: PPI
LAHORE:
At a time when the Pakistan stock market is outperforming many peers, Lahore Stock Exchange Managing Director Aftab Ahmad Chaudhry has, in a note of caution, suggested that investors should not misread the market momentum.
“We have been told by the Securities and Exchange Commission of Pakistan (SECP) to guide new as well as existing investors and prevent them from misreading the market due to its consistent performance,” said Chaudhry while briefing the media about investor sentiments here on Monday.
Pakistani stock exchanges, led by the Karachi Stock Exchange, are consistently performing well and are declared among the top 10 performers in the world. Chaudhry pointed out that trading volumes in the last fiscal year were higher than the average turnover recorded in the last five years.
“With the start of the new fiscal year, we are seeing more volumes and the trend is likely to continue as the country’s economy is improving,” he said, adding profits of the corporate sector were also on the rise and investors were coming back to the market.
However, it was a cause of concern for Chaudhry that volumes were highly concentrated in low-tier stocks, indicating investor interest in them rather than top-tier shares.
He cautioned investors that any law and order or political issue could hurt the market and they should keep these things in mind.
Past performance
In 2014, Pakistan ranked third amongst top 10 best performing markets in the world. It secured the place for the third consecutive year. In 2014, the stock index surged 6,870 points, giving a handsome return of 27%.
Dollar-based equity market returns stood at 12%, the third highest amongst Asian peers in 2014-15. Higher foreign inflows during the year also gave a major impetus to the market. Foreign investors, who hold $6.1 billion worth of Pakistani shares or 33% of the free float (9% of market capitalisation), were net buyers during the year.
According to Chaudhry, estimates suggest that currently around 50% of investment in the free float market is from the foreign investors and the volume is increasing.
He stressed that market regulators had learnt from past experiences and market crashes. “Everybody has learnt from the previous crisis and things are getting much better with the introduction of new services, which make investors safer and this is the reason why the market is stable for the last many years.”
Previously, investors relied heavily on brokers and often left their investments and shares with them; when brokers defaulted, which happened in many cases, the money of investors also drowned, he said.
To counter that, the regulators have introduced associated companies like the Central Depository Company (CDC) and the National Clearing Company, where investors can keep their money and shares and use brokers only for trading.
Published in The Express Tribune, August 4th, 2015.
At a time when the Pakistan stock market is outperforming many peers, Lahore Stock Exchange Managing Director Aftab Ahmad Chaudhry has, in a note of caution, suggested that investors should not misread the market momentum.
“We have been told by the Securities and Exchange Commission of Pakistan (SECP) to guide new as well as existing investors and prevent them from misreading the market due to its consistent performance,” said Chaudhry while briefing the media about investor sentiments here on Monday.
Pakistani stock exchanges, led by the Karachi Stock Exchange, are consistently performing well and are declared among the top 10 performers in the world. Chaudhry pointed out that trading volumes in the last fiscal year were higher than the average turnover recorded in the last five years.
“With the start of the new fiscal year, we are seeing more volumes and the trend is likely to continue as the country’s economy is improving,” he said, adding profits of the corporate sector were also on the rise and investors were coming back to the market.
However, it was a cause of concern for Chaudhry that volumes were highly concentrated in low-tier stocks, indicating investor interest in them rather than top-tier shares.
He cautioned investors that any law and order or political issue could hurt the market and they should keep these things in mind.
Past performance
In 2014, Pakistan ranked third amongst top 10 best performing markets in the world. It secured the place for the third consecutive year. In 2014, the stock index surged 6,870 points, giving a handsome return of 27%.
Dollar-based equity market returns stood at 12%, the third highest amongst Asian peers in 2014-15. Higher foreign inflows during the year also gave a major impetus to the market. Foreign investors, who hold $6.1 billion worth of Pakistani shares or 33% of the free float (9% of market capitalisation), were net buyers during the year.
According to Chaudhry, estimates suggest that currently around 50% of investment in the free float market is from the foreign investors and the volume is increasing.
He stressed that market regulators had learnt from past experiences and market crashes. “Everybody has learnt from the previous crisis and things are getting much better with the introduction of new services, which make investors safer and this is the reason why the market is stable for the last many years.”
Previously, investors relied heavily on brokers and often left their investments and shares with them; when brokers defaulted, which happened in many cases, the money of investors also drowned, he said.
To counter that, the regulators have introduced associated companies like the Central Depository Company (CDC) and the National Clearing Company, where investors can keep their money and shares and use brokers only for trading.
Published in The Express Tribune, August 4th, 2015.