Share this story!            

Media, regulators, illiterate investors caused crash

Staff Report

ISLAMABAD: The key factor behind the stock market crash in past weeks was an illiteracy among small investors, which could have been avoided by intervention of regulators.

This was the consensus of various stock market brokers and small shareholders at a seminar organized by the Sustainable Development Policy Institute (SDPI), entitled “Crash of Stock Markets and Future Remedies” here on Monday. Seminar discussion thoroughly discussed the reasons of recent crises and majority of the speakers and commentators. They termed the existing crises as the worst in the recent past. They said that Pakistan’s Stock Market is the most manipulated stock market in the world and our markets are now the gamblers house rather than a place for investment.

They also criticized big brokerage houses for not serving interests of small shareholders. Seminar urged the policymakers to bring reforms to stop gambling in the stock markets and regulators should positively step in to save irregular trends. Mohsin Babbar of SDPI, who moderated the seminar proceedings, told the audience despite an invitation was extended to the official representatives, they did not show up at the seminar.

Dr. Iftikhar Ahmad Chief Executive Officer of Black Stone Equities and Corporate Member of Islamabad Stock Exchange said that Security Exchange Commission of Pakistan (SECP), brokers and analyst in print and electronic media bear the responsibility as they had not played due role during the weeklong crisis in the stock market. He was of the view that Government’s silence was understandable, for it was bound to give the impression to the outside world that the upward trend represented the health of the economy.

He said that 95% to 98% investors are illiterate and totally dependant on the trends exhibited by the big investors rather than calculating the risk factor on their own. “Pakistani stock market is the most valuable market in the world, in terms of equities but simultaneously it is the most manipulated market as well,” he said insisting that only the government and semi-government equities heated the market while the rest remained unchanged.

Though the SECP failed to implement laws and the brokers and analysts kept investors in the dark, the blame rests only with the investors who, according to Dr. Iftikhar, acted out of ‘stupidity’ and wasted their hard earned money through future trading.

“The 98 % population of Pakistan takes stock exchanges as merely the gambling houses and this perception should be undone through stopping future trading that has landed small investors into the troubled waters,” he said.

Dr Iftikhar suggested that besides discouraging gambling in the stock market, the level of margin with brokers should be increased, culprits should be brought to justice across the board and safety valves be introduced to avoid such incidents in future.

“The government should intervene in the stock market but only positively,” he said and added that the recent crisis could have been averted if it had acted on the behalf of the local investors.

Mr. Mutahir Sohail of the PACE Investment and Securities, another speaker of the seminar, said that the stock market is not friendly to the small investors and they have been deceived all the times. Their money stashed away by the big investors in the crises of 1994, 2000 and the most recent one.

“Small shareholders, who are the backbone to the stock market of Pakistan are now discouraged to invest in the market. Government and media should play their role to bring them back.” He said. Speakers including audience urged the relevant authorities to appoint specialists and experts analysts to check the regular trends and formulate policies accordingly. The need to design an education program for when and where to invest was also emphasized by the audience for small investors.

Home | Business

Share this story!