Fool me once, shame on you, fool me twice, shame on me. As a force majeure for a period of 30 days, lower level circuit breaker will be applicable at price fluctuations of 1%, and upper level circuit breaker will be applicable at price fluctuations of 10% from the closing price of the previous day, to halt the decline.
A measure of market stabilisation taken by the Karachi Stock Exchange (KSE), under the supervision of Securities of Exchange Commission of Pakistan (SECP), announced in a press release by the KSE. What will happen after the 30 days, if the market does not respond positively?
Fluctuation is a constant factor in the stock market, just as it is in any other business. Great businesses not only survive fluctuations by adapting, but also use them as an opportunity to widen the lead over competitors.
Investors should be on the lookout for opportunities to take advantage of fluctuations as well, especially during the times when fear is growing in the market. Fear is aplenty on KSE, and across the country for that matter.
It is plainly obvious to any reasonably intelligent matriculate looking at the stock quote pages in a newspaper that stock prices go up and down unpredictably on a daily basis.
While fluctuations in the stock market and the business world are plainly obvious to everybody, the curious question is why so many, especially our politicians react with surprise when the market invariably changes.
Possibly, it has to do with human nature, particularly our ability to intellectually put ourselves to sleep by way of a misplaced belief that the near future will always closely resemble the recent past. Success is in the adaptability to changing conditions.
A good and knowledgeable investor can make money in the downtrend market. Truly great investors find ways to stay in business and, in fact, stay profitable during fluctuations - even especially miserable ones.
Quite many of investors on stock market are finding themselves in a tough spot now, which makes the dual issues of adaptability and survivorship all the more relevant to today's market condition. So far, much of the commentary on this most-recent economic downturn has centered on the issues of politics, it is not our fault syndrome.
Fear is seeping into the investing environment, in fact inculcated. The attitude is change the rules rather than play within the rules. Remember, the kid who has the ball if he does not like the game, he will take the ball and go home, the other kids feel stupid, and to accommodate that kid they would change the rules.
Ever since the creation of this country the same is going on, to accommodate the few, the rules were changed. No one complained when the market was growing exponentially, and all and sundry were making hay. Suddenly everyone is crying - the sky is falling, the sky is falling. These same investors made good money, paid almost no taxes, and strive to live happily ever after. These people have cried foul every time the stock market crashes.
The stop gap measure of introducing new breaches, 1% on lower level and 10% on upper level, that is if you own a scrip of say Rs 100 value, the investor will lose only Re 1, if the market goes down and make Rs 10 if the market moves upward.
This is against the principle of market-based economy. It is like moving the goal post to suit your weaknesses. The measure did result in a single day gain of over 900 points, but anyone bothered to notice the volume.
It was low. Does anyone know what the actual figure of KSE investors is? There is no accounting of investors from individual to institutional, resulting in chaos every time the market goes down, and people start pointing fingers. For a level playing field, I suggest that make all the brokers to open an account for all and every investors that are making a trade.
This will benefit the stock market to keep track of all the trades. It will help the brokers for creating a profile of the investors, it will bolster in creating market for IPO.
Above all, this will give advantage to the government in bringing this sector into the tax net. The same will hold for institutional investors. At present, the government is charging tax at a rate of 0.02% on every turnover of Rs 10,000,000, a minuscule amount considering what other segments of the economy pay in taxes.
The Karachi Stock Exchange is planning for demutualization of exchange and bringing in new ownership structure by inviting international investors.Regularizing of trades will certainly bolster the image of the exchange. Rightly or wrongly, everyone blames the five big brokers whenever the market goes spiralling down. However, where are these people when the market is bullish? Maybe they are all busy in counting their profits.