The Karachi Stock Exchange has behaved in an erratic manner for the last few weeks. Is it an inflow of investment or is it a game going on. I feel it is time to ponder to have an actual assessment of stock market investments and save the small investors from imminent disaster.
The recent rally is mainly due to the P.T.C, P.P.L, O.G.D.C, P.S.O in the wake of their privatization news. The last 3000 points increase in the KSE 100 index is mainly due to these few scrips. Besides privatization, other common things between them are their large number of shares being traded on the C.O.T.
The companies like PTC, PSO and OGDC are holding about 50% of the C.O.T cash. The large number of shares provides an easy entry and exit to the jobbers, who are the players and not the investors. The rising interest among the public on this basis, being envied by jobbers, makes a vicious cycle of the price increase of these stocks.
Every body is happy making money with out any notable investment in C.O.T and future trading, but we should not forget that the present winning game has to end or take a negative turn some day.
C.O.T and future trading adversely affects the stocks, which are traded on a T+3 bases. The psychological affect is that the shifting of public interest from the low turnover T+3 stocks towards C.O.T and future traded stocks. The financial affect is that of selling pressure on genuine stocks so that funds can be shifted towards C.O.T, where brokers permit up to five times the exposure against the funds deposited with them.
The overall scenario is a shift of genuine investment towards the game of C.O.T. This does not reflect the true picture of the economy.
The KSE 100 index is a reflection of market capitalisation. The picture can be very vivid if it is only restricted to pure T+3 transactions. There should be no contribution of games like C.O.T and future trading in the honourable KSE 100 index.