DUE to lack of knowledge about the stock business, several thousand of investors, in NWFP, who diverted their investments from other sectors to the stock market have suffered substantial financial losses. Like several other parts in the country, a large number of investors of NWFP— small and big—, after getting impressed by the boom in the stock exchanges opted for the stock business. The expansion of bourses was seen as a rare opportunity by the business and non-business circles of the province as they could not remain aloof after looking at the increasing volumes of the Karachi Stock Exchange (KSE).
Peshawar saw billions of rupees’ investment in the stock business during the last few weeks as industrialists, businessmen, functionaries of provincial and federal governments, retired civil and military officers, traders, shopkeepers and even, women entrepreneurs made investments in the stocks. These investors included a Pesh Imam of a local mosque.
A large number of people made huge investment in the KSE – in the absence of a stock exchange in the provincial metropolis reflecting the potential and the private sector’s financial capacity which makes a fit case for the province to house a stock exchange of its own.
A majority of the entrants was of small investors as several withdrew funds from their fixed deposits, some diverted money from their small businesses, several shifted funds from the real estate and there were people who invested their small savings in stocks. It worked for many, at least, in the initial days, as the KSE-100 index kept breaking records before taking a deep plunge.
Investors occupying cosy chairs and others standing in front of screens displaying KSE 100-index with the help of multi media system was a common scene in all the four brokerage houses in Peshawar.
Though all the four private brokerage houses, doing business in Peshawar, got their clientele multiplied manifold during the last couple of months, a number of the losers among new entrants is equally high.
Sources said that a majority of those who made investment for the first time relied on speculative trading and were driven by market sentiments. Most of the investors were trying to get rich overnight.
Most of them had entered the market after getting attracted by media reports about the growing volume of stock markets. Others acted on the advice of their well-wishers already associated with the private brokerage houses.
“Majority entered the business without caring much about the risks involved in it as every body thought about making quick and easy money, “said a broker. As a consequence, several lost even their original investments when the stock exchange lost more than 1600 points in a span of just four days.
The province does not offer encouraging business environment to the manufacturing sector, despite having a vast potential in several sectors including tourism, oil and gas, hydro-power, cement and furniture manufacturing, gems and mineral sectors.
Being far away from the seaport and lacking skilled labour force, poor infrastructure, tight government controls, deteriorating law and order situation is making the NWFP less attractive for setting up industrial units.
The province has more than 1700 industrial units, small and medium sized, which have been closed down after managements found it difficult to survive the tough competition from other provinces, particularly, from Punjab. Similarly, those 650 plus units which are functioning, they, too, are carrying out their operations at less 50 per cent of their capacity.
Only the affluent have been able to take advantage of the opening up of Afghan markets at the end of years old civil war in Afghanistan which also helped the Pakistani exporters to expand their outreach up to the Central Asian Republics.
Though the Securities and Exchange Commission of Pakistan (SECP) and Central Depository Company (CDC) made bids to apprise the local investors about the intricacies involved in the stock trading, it was already too late.
In their presentation, senior staff of the CDC and SECP claimed that the growth recorded by the bourses was real and that the market was not going to collapse as the government had employed ample safety wolves, in the shape of an effective regulatory apparatus, to protect the market.
Many believe that the NWFP has got a lot of potential for the stock business as, one banker put it like this way “there are several wealthy people in NWFP with lots of funds to play around in the stock exchange”.
The successive provincial governments have tried to convince the decision makers for establishing a stock exchange in Peshawar. Business circles are of the view that the establishment of even a branch of the Islamabad Stock Exchange (ISE) would open a new sector of investment for those who have patience for the nerve breaking business.
