The Butterfly Effect

Keeping Up With The News

Pakistan's National Accountability Bureau (NAB) just made a public statement this week that it is investigating two companies in particular for the Defense Housing Authority (DHA) Lahore scam that has been dragging along since 2009. The main Persons Of Interest are Hammad Arshad (head of Globaco Pvt. Ltd.) & Kamran Kayani (head of Elysium Holdings Pakistan Ltd.). Details are sketchy at the moment, but as the scam is worth PKR16 billion (approximately US$152 million), it would make most financial analysts wonder what (if any) effect will this investigation have on the global economy?

For that, the usual routine is to ascertain whether either of the companies in question are affiliated with any foreign firms. If so, then the next step would be to check how the stock exchanges are getting along in the countries in which those foreign firms are headquartered. Given below are some details of companies with similar names abroad & how the bourses of those countries are doing currently. After all, if even the smallest company in any given country were to get associated with a multimillion dollar overseas scam, the fallout would definitely manifest itself as a plunge in investments on the relevant stock exchange.

Globaco

Globaco is a German device manufacturer that supplies on-demand merchandise to the medical, automotive engineering, telecommunications, aviation & other industrial sectors mostly in Germany. According to the company website (www.globaco.de), it is a supplier of dispensing products, electrostatic discharge protection, soldering technology, thermal wire, tools & Wire Wrap technology.

This company doesn't seem to have much in common with Mr. Arshad's firm (other than similar names), bearing in mind the fact that it is an industrial hardware manufacturer & Globaco Pvt. Ltd is reportedly a real estate developer. Further bolstering this argument is the performance of the Xetra Dax over the last week: Mediocre.

Elysium Holdings

The online information on Elysium is a touch more unsettling: Given below is the relevant data on a company of the same name by Bloomberg Business.

Elysium Holdings LLC (Private Company)

Company Profile:

Sector:- Financials
Industry:- Asset Management
Sub-Industry:- Investment Companies

Corporate Information:

Address:- 3955 Nw 62nd Ln, Gainesville, FL 32653, United States
Phone: 1-352-372-9082

Elysium Holdings LLC was founded in 2005. The company's line of business includes holding or owning securities of companies other than banks.

Even more disquieting is the fact that the Dow Jones Industrial & the S&P 500 have both lost at least 5% during the last week alone. Considering that the holidays are still in full swing in the Western Hemisphere, the normal pattern at this time of year, is a share price spike in brands that have anything to do with holiday shopping & stability in all other brands. The current pattern is a dramatic departure from the usual routine.

While there could be several reasons for this odd behavior, one possible explanation is that the Florida-based Elysium Holdings LLC deals in the management of company securities. NAB claims to have been investigating Kamran Kayani's company since April 2015. Is it possible that the shares being managed by the American firm are feeling the heat of Mr. Kayani's misadventures?

Conclusion

If so, the only way to prevent further losses is for all parties to be completely transparent about the existence of any & all connections between all parties. The last few years (since the Lehman Brothers fiasco led to the 2008 Financial Crisis) have witnessed dramatic changes in the global economic landscape. The result is that the international investor community is a lot more distrustful of unexplained patterns than it once was. It would be a crying shame if a purely local scam blossomed into another battering for already-depleted Western businesses. Heaven knows they already have plenty of cash-flow issues to deal with. Here's hoping that everyone manages matters more logically this time around.