Hi guyz
After the hallmark plunge of our stock market in the recent past, it's again started to show signs of revival. What you ppl think were the possible reasons of its upward movement n then its fatefull downfall?
Comments are welcomed from all the forum members.
fahim
Allow me to provide a good article printed in the local press about KSE.
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A couple of years ago, a 500-sq-yard residential plot in Islamabad
was priced at an average of Rs4 million. It now fetches up to five
times that amount. In March 2003, the KSE-100 Index stood at 2,400
points. It now stands at four times that.
The other important factor to be kept in mind is our foreign exchange
reserves. The State Bank's official foreign exchange reserves for
financial 1998-99 stood at $2,279 million. Then came the coup d'etat.
Our foreign exchange reserves went down to $1,967 million, a loss of
13.7 percent. Then came September 11 followed by Bush's Patriot Act,
which was passed by the Senate exactly a month after the attacks.
For financial 2001-02, the State Bank's foreign exchange reserves
stood at $3,219 million. The following year, our reserves went up by
100 percent. For 2002-03, reserves were up again, crossing the $10
billion mark, an increase of 67 percent. As of January 2005, the
figure is $12,760 million. In effect, our reserves have multiplied
more than six times over a relatively short period of time.
An extraordinarily rapid accumulation of foreign exchange reserves is
actually a rare phenomenon. In the 1960s, when Japan began exporting
its Toyotas to the US, its foreign exchange reserves grew at a
phenomenal pace. In the '70s and '80s, Japanese real estate and
Japanese stocks went through the roof (technical term asset
inflation). South Korea, Hong Kong, Taiwan, Thailand and Singapore
have already been through similar cycles, while China is going
through the phenomenon now.
Two other common precursors to all cases of asset inflation are high
bank liquidity and access to cheap credit (read banks have a lot of
money to lend and interest rates being low).
To be certain, Pakistan's asset inflation has at least three of the
most critical ingredients rapid accumulation of foreign exchange
reserves, high bank liquidity and low interest rates. What's missing
is export growth. In the case of Japan -- followed by South Korea,
Hong Kong, Taiwan, Thailand and Singapore -- foreign exchange build-
up was "export-driven." Our foreign exchange build-up, on the other
hand, is not export-driven but, perhaps, "fear-driven" (Pakistanis
sending money back).
Twenty years ago, a downtown Tokyo apartment went for over a million
dollars. When the crash came, Tokyo's' property prices went down by
50 percent. In 1998, Bangkok, Singapore and Hong Kong went through
severe property crashes. In Pakistan, the saving grace behind real
estate is that most of it is not leveraged (read minimal bank loans
against property), and thus not as vulnerable to forced liquidation.
The Nikkei 225 Index of the Tokyo Stock Exchange has valuable
lessons. The Index began rallying in the '70s. The rally continued
into the '80s, reaching an all-time high of 38,915 points on Dec. 29,
1989. Seventy percent of the value has been whipped off since then
the most recent quote on Nikkei 225 is 11,864 points.
On March 10, 2000, America's NASDAQ Index -- the "new economy" index -
- surged to an all-time closing high of 5,048 points (in 1999, NASDAQ
had surged 86 percent in just one year). By October 2002, NASDAQ had
come down to 1,114 points, an accumulated loss of 78 percent.
In Pakistan, two precursors to asset inflation (read high price of
land and stocks) are already changing direction. First, home
remittances that came in at $382 million in January 2004 dropped to
$321 million in January 2005. That amounts to a drop of 16 percent;
not a major drop, but a change in direction nevertheless. Second,
interest rates are now on their way up. In June 2001, the average
weighted lending rate was 13.74 percent. By March 2004, the same had
dropped to 4.69 percent, but has since gone through a nearly 100
percent upward movement.
Is the Pakistani nation getting rich? When the prices of shares go
up, only the owners of those shares get rich. When the price of land
goes up only landowners become rich (no more than two percent of our
population actually owns shares or land). A nation only becomes rich
when the "price of labor" (salaries) goes up, and that unfortunately
isn't happening in Pakistan.
I have been a student of finance for more than twenty years and have
witnessed bubbles before. Nikkei kept on rallying for a decade, while
the bubble at NASDAQ busted in two years. For the record, the rally
at the Karachi Stock Exchange is less than three years old. What I
have learned is that bubbles go higher than most expect them to and
when they burst they go lower than most had anticipated.
The most worthy advice is that when taxi drivers begin buying stocks,
it's time to get out of the market (it will be interesting to find
out whether Karachi cabbies have started buying or not). What I have
also learned is that the bigger a bubble the harder it bursts.
no more response!
«â¢Â´`â¢.(*â¢.¸(`â¢.¸ ¸.â¢Â´)¸.â¢*).â¢Â´`â¢Â»
«................. Fahim .................»
«â¢Â´`â¢.(¸.â¢*(¸.â¢Â´ `â¢.¸)*â¢.¸).â¢Â´`â¢Â»
yar fahim i think that there was a downfall because u started taking interest in it,,.and when u left stockexchange on its own , it recoverd[})]