KARACHI: The enticing return of 46 per cent provided by the Pakistan stock market in last calendar year – billed as the best among the Asian markets – has gone well with bullish investors who have already tossed the KSE-100 index quite close to the coveted 50,000 points level.

Setting aside the argument about the composition of the index that is tilted in favour of heavyweight banking, cement and oil and gas companies, anyone can see that the stock prices across the board are rising by leaps and bounds.

While it is easy to argue in favour of the soaring share prices of the heavyweight sectors on the basis of their underlying company fundamentals and their future performance, the sudden jump in share prices of second and third tier companies is difficult to determine. Scores of dead and dying companies have come to life. Even those that were quoted below the par value of Rs10 have gathered substantial premium.

“The stock prices of cement shares are on the mount as investors have put their faith on a strong demand mainly due to the China-Pakistan Economic Corridor projects,” argued a senior broker.

Yet, the question is how a company saddled with huge sums in debts and deficit with inoperative plant can be expected to provide investors value for money.

The PSX and the Securities and Exchange Commission of Pakistan have left it to the investors wisdom to pick and choose, which pushes such small investors to rely on their own decision -making power or more on the “gurus” that abound on the social media (Facebook, WhatsApp).

However, to be fair to the regulator, it has to be stated that it is keeping an eye on abnormal price movement in stocks.

On Wednesday, the company secretary of Aisha Steel Mills Limited (ASL) replied to the query from SECP’s Securities Market Division that it was unaware “of any reason for movement in share price and volumes of ASL”.

He further assured that any material/price sensitive information in future would be disclosed by the company in accordance with the applicable provisions of the Securities Act, 2015 and PSX Rule Book”.

Market participants say that such queries from the apex regulator are a routine matter and the answer, probably in good faith, is also.

The stocks in the KSE-100 index are less likely to be cornered or manipulated. With so many foreign investors; high net-worth individuals, financial institutions and mutual funds doing research-based trading in KSE-100 stocks, it would require a huge risk appetite and financial muscle to manipulate prices of 100 stocks; which would not be worth a try,” said a knowledgeable market participant.

It is, therefore, the low priced stocks that small investors usually dabble in and due to the herd mentality, their decision to buy can easily be influenced by rumours of expansion, take-over, new product launches and rescheduling of debts.

Is it then upon the regulator to dig deeper to search for any wrongdoing, cornering or misleading or merely to despatch an innocent query to the company concerned and leave the small unsuspecting investor to fend for himself under the rule of “caveat emptor” (buyer beware)?

Published in Dawn, January 12th, 2017