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I would like to initiate a discussion on this subject as always the investment gurus keep on saying that long term investors are the winners in stock markets. For this discussion I am taking the time frame between 2010 to 2015, a five year period.
The facts we can see are as follows.
-Economy grew by 7.4% on average
-ASPI declined from an all time high of 7800 to 6800
-Most of the top companies have doubled their profits (JKH 9bn to 15bn, COMB 6bn to 12bn, NEST 2bn to 4bn, CTC 2bn to 11bn, DIAL 5bn to 5bn)
Though the growth rate were encouraging and accordingly corporate earnings were encouraging too why the index was lagging behind 1000 points is the situation. Further in this year we have seen a further erosion of the index by 800 points so far. So an investor invested in 2010 or 2011 has made any gain by now?. The index suggests still he is in a lost state.
So the next question is why the index has not moved to 8000 or 9000 by now.
Is it because the extraordinary performance of the index in 2009 (over 100% appreciation) and 2010 (over 90% appreciation) has absorbed all the due gains till 2020 in advance which means if normal growth had been experienced the ASPI could have been around 8000 by now not in early as 2011.
Or is it because world economy face many issues during the same period which has impacted our stock market
Or is it because domestic issues have prevented the market to climb above 8000 points
In case of world market the issues were visible since as early as 2008 but yet CSE were the best performing market in 2009 and 2010 so world economic problems seems to be has a lessor impact.
Then domestic issues have any impact? From 2010-2014 the regime was same as in 2009-2010 yet the index failed to touch 2011 figure. Exchange rate was deteriorating but controlled by CB despite continued BoP deficits. Every year we had increasing BoP deficits during the past five years. We experienced huge foreign selling in 2010-2011 period where US interest rates were coming down. Local interest rates were increasing till 2012 but thereafter falling yet index has failed to touch the 2011 level.
So then the other factor remain is the unprecedented growth achieved during the period 2009-2010 period. Normally a stock market can grow between 15-20% annually based on empirical studies. If we applied that rate to our index 7800 should be established now not in 2011. The facts pointing out that investors enjoyed hefty gains in 2009-2010 are getting adjusted now. On the other hand we are facing the consequences of market overreaction happened immediately after the war.
The facts we can see are as follows.
-Economy grew by 7.4% on average
-ASPI declined from an all time high of 7800 to 6800
-Most of the top companies have doubled their profits (JKH 9bn to 15bn, COMB 6bn to 12bn, NEST 2bn to 4bn, CTC 2bn to 11bn, DIAL 5bn to 5bn)
Though the growth rate were encouraging and accordingly corporate earnings were encouraging too why the index was lagging behind 1000 points is the situation. Further in this year we have seen a further erosion of the index by 800 points so far. So an investor invested in 2010 or 2011 has made any gain by now?. The index suggests still he is in a lost state.
So the next question is why the index has not moved to 8000 or 9000 by now.
Is it because the extraordinary performance of the index in 2009 (over 100% appreciation) and 2010 (over 90% appreciation) has absorbed all the due gains till 2020 in advance which means if normal growth had been experienced the ASPI could have been around 8000 by now not in early as 2011.
Or is it because world economy face many issues during the same period which has impacted our stock market
Or is it because domestic issues have prevented the market to climb above 8000 points
In case of world market the issues were visible since as early as 2008 but yet CSE were the best performing market in 2009 and 2010 so world economic problems seems to be has a lessor impact.
Then domestic issues have any impact? From 2010-2014 the regime was same as in 2009-2010 yet the index failed to touch 2011 figure. Exchange rate was deteriorating but controlled by CB despite continued BoP deficits. Every year we had increasing BoP deficits during the past five years. We experienced huge foreign selling in 2010-2011 period where US interest rates were coming down. Local interest rates were increasing till 2012 but thereafter falling yet index has failed to touch the 2011 level.
So then the other factor remain is the unprecedented growth achieved during the period 2009-2010 period. Normally a stock market can grow between 15-20% annually based on empirical studies. If we applied that rate to our index 7800 should be established now not in 2011. The facts pointing out that investors enjoyed hefty gains in 2009-2010 are getting adjusted now. On the other hand we are facing the consequences of market overreaction happened immediately after the war.
