Islamabad, Aug 25 (IANS) The international impact of the stock market collapse was felt in Pakistan, said a daily here on Tuesday.
An editorial “Black August” in the News International said that following the panic in the international stock markets created by a slowdown of the Chinese economy, the Karachi Stock Exchange (KSE-100) plummeted by 1,300 points near the close of trading on Monday, down around 4 percent on a single day.
Analysts have blamed the panicking small investors and the exit of foreign investors from the market. Some suggest foreign investors made profits by selling Pakistani stocks as they suffered serious losses in other emerging markets.
The daily said that market capitalisation fell by Rs.300 billion.
“In addition to the Chinese slowdown, the international downturn is also being attributed to the fall in international commodity prices, uncertainty over when US Federal Reserve might raise interest rates and the Greek economic collapse.”
The editorial said that the crisis started when the Chinese government decided to devalue the yuan by around 2 percent two weeks ago which sparked concerns over low growth in Chinese exports.
Experts have now predicted that the devaluation of the Chinese currency is likely to flood the market with cash.
“The biggest impact was felt by Chinese stock markets where the Chinese Shanghai Composite index came down by 8.5 percent on Monday. This is the biggest one-day slump in China since 2007.”
“…The impact of what is being called ‘Black Monday’ is being felt across the globe with KSE-100 being a small part of the global collapse… While some observers are calling it a ‘correction’ in the global markets, Monday has shown an underlying instability in the global financial system,” said the daily.
The editorial went on to say that the three key nodes of the global economy are in a steady crisis. “Europe, the US and China are all facing serious problems.”
“There are no immediate remedies available in the stock market as the international impact of the collapse will be felt in Pakistan.”
It added that the month of August has wiped at least $5 trillion off the global economy.
“Is this a full-blown economic crisis?,” the daily asked and added: “It is too early to say.”
“But it does say something about the volatility of the global economy that a decrease in the value of the Chinese currency has set off questions about the entire economic recovery story that has been painted since the last global economic crisis in 2007,” it said.