KARACHI: Stocks tumbled over 1300 points at the Karachi Stock Exchange (KSE) 100 index, DawnNews reported. The stocks fell over five per cent in the first two hours of the days trading, with the KSE-100 down 1310 points and trading at 28,126.38. Analysts attributed the fall to political tensions and uncertainty as the days come near for the opposition party Pakistan Tehreek-i-Insaf (PTI) to hold an ‘Azadi’ march in Islamabad on August 14 and the skirmishes of Pakistan Awami Tehreek (PAT) workers and police personnel in Punjab. They assume that foreign investors may resort to pulling their businesses out of Pakistan due to the volatile situation. --- The market is panicking. You shouldn’t --- The article extract below was published in Dawns Sunday Magazine, August 10, 2014 The Karachi Stock Exchange is notoriously bad at judging the impact of political events on financial outcomes. That means that, for a politically sophisticated observer, market gyrations brought about by mass political protests or other political noise — such as those of this past week — can represent a fantastic buying opportunity. Why is the market so bad at judging political events, you might ask? Because nearly all Pakistanis have been taught lies about our history, and our culture of keeping silent about inconvenient truths means that most people have not developed a world view that conforms to reality. This is why we believe in stupid conspiracy theories that basically all boil down to “we’re perfect and the whole world is jealous and out to get us”. You may not think this matters to markets and investing, but it does. The KSE is more than just the physical stock exchange and its management. It is the 200 brokerage firms, their thousands of employees and hundreds of thousands of clients all making investment decisions simultaneously that results in a collective view of what they think the future holds. Any market is subject to the delusions and hysteria that grip its participants. In other countries, such delusions and myths tend to be about economic matters. In ours, the political and religious can be quite important as well. Nonetheless, over the long run, the market is forced to reconcile with reality, because commerce trumps ideology for enough people enough of the time. That means that, while the short run can seem to validate those delusions held by the public, the long run will bear out the investment hypotheses of those who are aware of reality. Read moreDawn News
Posted on: Mon, 11 Aug 2014 06:24:10 +0000
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