Nov 25, 2008

KSE100 returns this month - 0%

I wrote an entry earlier about the Karachi stock index. The exchange had put in a price floor below which the index was not allowed to trade. The utter height of folly. Let's check back in and see how it is doing.

First thing you notice is that the floor is still in place. The index has flatlined. Wow that is great. Shouldn't we adopt that principle here? Take a look at the lower graph. This is a plot of volume; how many shares have traded. In case it's hard to see it is zero. No stocks have really traded since the floor was put in. The exchange in effect has completely killed itself. It doesn't exist for all practical purposes. Liquidity has dried up. All these companies have lost a marketplace for raising capital. Why anyone thinks dicking around with the market is a good idea is beyond me.

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