Year 2008 most painful for stock market

The year 2008 was the most painful period for stock market investors as share prices plunged 58 percent (67 percent in dollar terms) to 4-year low, compared to the gain of 40 percent (38 percent in dollar) in 2007.
It was the worst year ever since the KSE 100 Index was composed in 1991, as investors lost tons of money due to the weakening of economy, political tension, security concerns, and global financial meltdown, Muhammad Sohail, senior analyst at JS Global Capital, said.
Imposition of price 'floor' by the regulators for three-and-a-half months was confidence killer for the market, as it created one of the worst crises in local markets, he said. Karachi bourse, which fell by 35 percent (47 percent in terms of dollar) before the imposition of floor, also crashed by 36 percent in 12 trading sessions after the lifting of floor rule.
Value of the Karachi bourse eroded by 66 percent to $23.5 billion at the end of 2008. From an all-time high market cap of $75 billion in April 18, 2008, the value eroded by 69 percent. This resulted in Market Cap-to-GDP ratio, a measure of size of capital market in any economy, coming down to 14 percent from 49 percent a year back.
The average daily volume in the cash market fell by 48 percent in 2008, to 133 million shares. In rupee terms, it was down by 44 percent, to Rs 14.2 billion, and 47 percent in dollar terms to $220 million.
In the derivatives market, average daily turnover fell by 51 percent to 29.4 million shares with 42 percent decline in rupee and 46 percent in dollar. However, excluding the price floor period, the average daily share turnover was 182 million shares (down 29 percent) that is Rs 19.6 billion (down 22 percent) or $304 million (down 27 percent).
Due to global financial crisis and later on due to the imposition of price floor that resulted in exclusion of Pakistan from MSCI record foreign selling in local markets was seen. Foreigners bought shares worth $2.2 billion and sold shares valuing $2.6 billion last year (till December 30, 2008), thus resulting in net selling of $439 million, according to NCCPL data. Foreigners who were holding shares worth $5 billion at the beginning of 2008 now hold Pakistan equities estimated at $1.5 billion only, on account of eroding share values and offloading of shares.