April 20, 2008	Sunday	Rabi-us-Sani 13, 1429

KARACHI, April 19: When the bulls begin to charge, they usually do it relentlessly. Analysts and equity market followers tire of repeating the same old phrase every passing day: ‘The KSE-100 index has hit record high’.

But that exactly is what is happening. The KSE has been blessed with a one direction, north, regardless of where the developed and regional markets are heading. The stock prices at the Pakistani market are crossing over the high barriers set by many of the timid analysts.

The index on Friday, the last trading day this week closed at 15,676 points, safely above the 15,000 level. The market capitalisation stood only a shade short of the incredible mark of Rs5 trillion; $76 billion.And when the bulls begin to charge, they do so with a fixed gaze on the positives. Quite clearly politics and not economy, is driving the market. There is general depression over the economic numbers, all of which set at the start of the fiscal year, have gone astray.

If the stock market in modern times is still regarded to be the ‘barometer of a country’s economy’, the one that hangs over the KSE looks desperately in need of repairs.

Brokerage firm, InvestCap listed positives during the week that included the rise of crude to record $117 per barrel; increase of petrol and diesel prices by Rs3 per litre; remittances scaling to over $600m in March and the consent of Asian Bank to provide $800 million for power projects.

The negatives, shrugged off by the market included provision of Rs33.2 billion by banks against non-performing loans in 1Q08; decline in cement prices by Rs10-15 per bag; PSO’s decision to close the tap supplying furnace oil to Hubco and from the international front news that European Union pronounced Pakistan polls ‘short of meeting international standards’.

Some of the market pundits looking back over such neck-breaking speed of the stock index suggest caution. One reason being the total leverage buying, which at the weekend aggregated to a huge order of Rs84 billion. So are the small investors biting more than they can chew?

Investment under the Continuous Funding System (CFS) almost touched the upper limit, and stood at Rs54.5 billion. Investment in CFS Mk-II was Rs1.84 billion on April 17, ten days after the launch of the new financing product on April 7.

And finally the amount of future open interest grew by significant 57.5 per cent during the week to Rs29.3 billion, one reason being the change in method of calculating outstanding open interest from a brokerage house basis to a UIN basis (each individual investor).

Doddering at that height, the KSE index could lure unsuspecting investors and no one can say if the peak isn’t still further up. In case of a sharp plunge, however, it would be unfair for the investor to blame the broker (even if he, at such a torrid time is still to be found in his room) for the brokers’ livelihood depends on selling optimism.

The rule of caveat emptor (buyer beware) prevails for investor, particularly the one with small means.