In the news: Tuesday

  
Karachi: No man’s land to sell stake in exchange to overseas bourse
 – As the Karachi Stock Exchange converts to a public company, the board and investors believe that selling a 5-10% stake to a larger regional (such as the Dubai International Financial Exchange) or European bourse, “would be a step in the right direction because it will help bring in technology infrastructure, cross- border listings and product development…[KSE is] still a plain vanilla exchange [that] needs derivatives and other products to be brought in.” The growth story here revolves around a small denominator: $5B (consider, Polo Ralph Lauren (NYSE:RL) has a market cap of over $10B) to $70B in 6 years.

To its credit, the exchange achieved this growth during a time of serious political and social instability, both now hallmarks of the culture, which is apparent to anyone who’s spent even a day in the region (you quickly realize that any thing/person/belief/moral can easily be bought or exchanged for the right price –often a low one). The market regulator hopes to combat these natural tendencies by installing a “real-time system which will give minute-by-minute updates of who is doing what and will flag various trading patterns.” Currently, even without a surveillance system, “corporate results are leaked out and there is abnormal price movement prior to the announcement, but unfortunately nothing is done by the regulator to catch insider traders.”  [Bloomberg]

Consumer confidence: Egyptians rank highest in Middle East
The latest survey of consumer confidence in the Middle East and Levant (MEL), commissioned by MasterCard (NYSE:MA, up 286% y/y) in the first half of 2007 measures perception of consumer confidence for the six months ahead. The countries surveyed include: Saudi Arabia, the UAE, Kuwait, Lebanon, Egypt, India, and South Africa; and scores are based on individuals’ answers to questions regarding employment, their respective national economy, regular income, the regional stock market, and quality of life. Total scores against their counterparts from 6 months ago are out of 100; the results follow:

Egypt…………..94.3, up from 78.2
Saudi Arabia….92, down from 97.3
Kuwait………….91.6, down from 94.5
UAE……………..88.8, up from 80
South Africa….80.7, down from 86.5
India…………….63.6 down from 65.1
Lebanon………38.6 down from 67.6

Perhaps not surprising with its rampant inflation, although relative to Zimbabwe (3,400%+), the term is hardly appropriate, India scores a lowly 63.6 out of 100, down from last year’s 76.4, indicating that Indians are bordering on neutral concerning the country’s economic situation. With a service sector employment attrition rate of 40%, largely fueled by workers taking bets on the idea that they can get better jobs and higher salaries through lateral job shifts, the confidence index suggests that inflation could be having a much more pronounced effect on consumer sentiment than believed by simply reading the Times of India (of which I’m guilty).  [Khaleej Times]

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2 Responses to “In the news: Tuesday”

  1. Jordan Says:

    I fear that while these exchanges have been able to survive and grow during political instability they might not survive in the future and like domino’s knock down other economies when they fall. What is our protection from these foreign exchanges?

  2. empiricalskeptic Says:

    That they’re going public isn’t an issue for which we need protection; in abstract, the situation is no different than any other company going public. Considering the trend in global merging, it can only help, though my view is largely influenced by my line of work (consequently, biased). Our view, perhaps a myopic one, is that the merging of international bourses is a positive: it helps us to provide extra liquidity to clients. As for political/macro-economic risk, think of each exchange as a marketplace, as you merge them you make the marketplace bigger. A bigger marketplace would able to sustain hits to the smaller marketplaces (a wing of the new, bigger marketplace is shut down for three months due to flooding, or a more global scenario: all of the frozen yogurt shops close down), which would be absorbed within the overall business.


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