INVESTORS in stocks at the Pakistan capital markets have all the reasons to be pleased. The stocks have delivered a mouth-watering return of 48 per cent during 2012, which put into shade the loss of 5.6 per cent in equity values in the preceding year. The KSE index of 100 shares added an incredible 5,518 points to its closing at 11,347 points at the end of 2011. The index is now just a step away from 17,000 points, which is an all-time high.

Most stock strategists affirm that the double-digit dividend growth and low valuations of Pakistani equities is the fuel that has fired the stock boom. Mohammad Sohail, CEO at brokerage Topline Securities, says the major boost to Pakistan equities was provided by declining interest rates; resolution of capital gains tax related issues; improved foreign portfolio inflows; rising consumerism; and good corporate earnings.

Yet most people believe that the benefits of equity fortunes are not widespread. There is the need to bring bigger companies and bigger floats into the market and to expand the investor base.

The number of companies registered with the Securities and Exchange Commission of Pakistan exceeds 60,000. Yet the number of listed companies is around 573, which means one in hundred registered companies hit the road leading to the stock exchanges. Only three companies made Initial Public Offering (IPOs) during 2012 to seek listing. Enormous numbers of companies in almost all sectors – from fast-moving consumer goods (FMCG) to cellular service providers enjoy the freedom of free-market economy.

A major event this year was the promulgation of the Stock Exchanges (Corporatisation, Demutualisation and Integration) Act. It stipulates that the 200-member fraternity of stock brokers was about to see an end to its 60-year control of the market.

At the height of 17,000 points, investors are bound to feel giddy. So, would there be a pullback? No one is quite sure. There may still be a long way to climb up as most brokers would make investors believe. But in case of a sharp plunge, it would be unfair to blame the broker, for his livelihood depends on selling optimism.

The rule of ‘caveat emptor’ (buyer beware) prevails. But some market pundits do call for caution. The bulk of activity in the last few months in ‘low-priced’ stocks suggests that the small investors badly bruised by the bear rampage of 2008, may again be biting more than they can chew.