KARACHI: The biggest issue the stock market facing today is that retail investors have pushed out of the market due to non-availability of liquidity that has closed the supply side.
This was stated by Director of Karachi Stock Exchange Zafar Moti while talking to Customs Today. “The benchmark KSE 100 Index has peaked to an all time high-level and the companies are also performing good at the macro level. And though the market could perform even better it has gotten stuck at the level, high as it is, presently due to a number of factors like the skirmishes across the border with India, the recovery of a couple of huge arms caches, the security concerns during Muharram,” he added.
“A massive cash crunch in addition to low savings, power crisis, food prices pushing to unafforadable levels resulting in across the board increase along the supply side, the high cost of living, high spendings by the government and high bank spreads have all taken a toll to let the market achieve its potential,” Zafar Moti maintained.
“The fallout of the retail investors pushed out of the market has resulted in the shrinking of pie for investors and it has allowed the foreign funds to dominate the blue chip shares-70 percent free float of which is held by American investors and the remaining 30 percent from other countries”.
The low volumes results in the shrinking of trade and it also slowed down the overall activity at the stock market, he said, adding that “We have now turned into a Frontier Market Index instead of Emerging Market Index.” A frontier market is a type of country that is not a developed market. Frontier Market is a tem commonly used to describe a subset of emerging markets whereby an emerging market is a country that has certain characteristics of a developed market but is not a developed market and this includes countries that may be developed markets in the future. However, there is a silver lining in the sky, Mr Moti held.
