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Crisis Investing: Pakistan closes the Karachi Stock Exchange for 3 days

Posted December 28, 2007

"The Karachi Stock Index (KSE-100) so far has not experienced a dramatic drop yet. It fell by 42.77 points or 0.29 percent to 14722.08 points. To minimize the impact of yesterday's terror attack, the market will remain closed for three days." — J. Christoph Amberger

Baltimore — (TFN): Financial writers have latched on to yesterday's assassination of Pakistani political contender Benazir Bhutto as an explanation for a drop in Asian stocks on Friday. It's the old song-and-dance routine of "concerns of further geopolitical tensions in the South Asian continent" that supposedly has investors furrow their collective brow and sell.

It is, of course, pure bunk.

Unless a fund is heavily invested in Pakistan, there is no need to sell. Despite (or maybe because of) the country's crucial role in the resistance to Islamist terror and President Musharraf's controversial (but in my humble opinion thorougly justifiable) hard line government, foreign investment in Pakistan was rather limited. In 2007, Pakistani stocks may have have climbed 41 per cent in dollar terms. But according to an article by The Globe and Mail today, "foreign direct investment has risen from around $1-billion five years ago to $3.5-billion."

Make that "only" $3.5 billion — chump change as far as emerging markets are concerned.

If there is any downward pressure in today's global market, look no further than the fact that traders hate to be caught with large open positions over what is shaping up to be a four-and-a-half-day weekend, especially at the end of a fiscal year!

The Karachi Stock Index (KSE-100) so far has not experienced a dramatic drop yet. It fell by 42.77 points or 0.29 percent to 14722.08 points. To minimize the impact of yesterday's terror attack, the market will remain closed for three days, "as the country mourns the death of its most influential leader", as the journalists put it.

Or "to make sure the global public has forgotten all about Benazir Bhutt by Wednesday" as cynics might call it.

Probably a wise and predictable move…

See yesterday's TFN coverage on how to play the crisis in Pakistan as a trader. 

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Posted by J. Christoph Amberger · Filed Under Editor's Pic, International Investing 

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