KARACHI, April 17: The KSE-100 index remained flat at the dizzy height of 12,000 points on Tuesday, April 17. Why scare the investors, but it was this day in 2005, when the index had accelerated its fall during the infamous case of March 2005 stock crash.
The country’s premier bourse had then lost nearly a quarter of its value in just 15 days. No one is suggesting that history would necessarily repeat itself. But the fear is in the air.
Ask any broker and he would open up his palm and fold each finger to count ‘genuine’ reasons for the current bull-run: The remittances scaling to $500 million; the 7 per cent plus projected growth in economy; the lower-than-regional market multiples; the growth of the mutual fund industry and the local and foreign liquidity that downs the market.
“If punters resort to selling, stocks are picked up by foreign funds, who find them attractive at current valuations”, says trader Wasim Aslam. Stock brokerages have all the right reasons to be bullish. For the moment, the political uncertainties, the black coats and the Lal Masjid are no threat as deep pocket investors thrive in riches.
Meek voices are, nonetheless, heard from some bears regarding the ‘spinning tops’ and ‘double tops’, which are thought to be bearish signals, but no one wants to be the spoiler of the market for fear of ferocity of the brokers whose livelihood depends on selling optimism.
The ordinary and small size investors must, however, be cautioned to glance below before climbing to conquer greater heights. The highest point over a year was 12,273. And that does still leave some space above. But the market has already offered 25 per cent returns since the start of the year.
“The KSE has been the best performing market in the region this year,” says the CEO of a major brokerage house. It has beaten BSE30; Hang Seng; Nikkei225; Shanghai Composite and Strait Times.
It would be known before the week is out whether the present rally is different from the past and whether the market is set to scale new heights. Interestingly, for the moment, no one at the market shudders at the outcome of next hearing of the National Assembly’s Standing Committee on Finance, investigating the March 2005 crisis.
It looks like that would be a show worth watching on April 24, when the judges (members of the Standing Committee) understandably ignorant of the intricacies of the stock market functions sit up loftily to question both parties: Those who believe that the stock market crash was generated by ‘misdoings’ of the brokers and those who have already exonerated them.
Even the team of US forensic investigators Diligence Inc. which conducted probe has been summoned. For a fat fee of $10,000 per day, the foreign forensic investigators combed the ground for weeks in search of the smoking gun. None was found.
But if there was anything fishy (which the former chief of SECP, Dr Tariq Hasan says he could smell), the sitting apex regulator says he has found no ‘wrong doing’. It would be interesting to see if and how Naveed Qamar, Kashmala Tariq and other members of the committee are able to do the impossible of uncovering the trails of financial fraud, if one had actually been committed.
