Crash teaches small investors a bitter lesson
Karachi-based Saleem Altaf, who retired from Habib Bank four years ago, was starry-eyed when he saw the Karachi Stock Exchange index's daily leaps in the first half of March.
He pulled out 75 per cent of his provident fund and savings and bought heavily into Pakistan State Oil and Pakistan Telecommunications at their peaks.
When the market crashed, he thrust aside his vow of cutting losses if the stocks dipped 10 per cent and simply hung on, hoping for a reversal of fortunes. His greatest misfortune was panic-selling at the very bottom. The stocks have since recovered partially, but he is not one of the gainers.
'I was hoping to buy a larger flat with profit from the stock sale; now it's going to be hard to find money for my monthly maintenance,' he said. 'I have learned a valuable lesson: the stock market is not for small folks like me.'
Shamsuddin Mia, a clerk at a Karachi shipping agency, said he put all his savings into stocks he knew nothing about at the advice of his boss. 'The investment shrank to about half within a fortnight. Now, instead of having enough money for my daughter's wedding later this year, I am faced with the prospect of delaying it for a year.'
Stock exchange managing director Moin Fudda has heard these stories before. 'There was too much over-stretching and that is always bound to cause trouble,' he said.
Still, events of the past month have left him reeling. 'We had taken reasonable risk-management measures but when the crash came, it was so sudden ... we were caught napping by its severity.'
A tad luckier than Mr Altaf and Mr Mia was Javed Siddiqui, an insurance agent who took out a bank loan using his flat as security.
'I bought PTC shares at the top, but sold them at a loss of 15 per cent within a week of buying them,' he said. 'I returned most of the loan amount immediately and should be able to repay the balance before the year end. But I will never again be lured by the stock market.'
Brave words. But analysts say in a poor country like Pakistan, the lure of getting rich quick in the stock market will always be hard to resist.
