THE bulls appear to have pushed the bears back into their cages to finally take over Pakistan’s stock market, with the benchmark KSE-100 index crossing the 50,000 barrier for the first time in six years. Although the index has been up by nearly 25pc in the past four months, it is not yet clear if the bulls will be able to maintain their dominance for long. While some are celebrating the current spike as ‘long overdue’, others remain wary of this surge. The market has mostly been in decline since hitting the all-time high of over 53,000 in May 2017 over political uncertainty caused by the disqualification of former prime minister Nawaz Sharif. Since the pandemic days, when the index dropped below 28,000, the market’s upward journey has been erratic as political instability has been compounded by the economic downturn during the post-Covid years. This was in spite of strong financial results delivered by the listed firms during this period. Thus, it is not incorrect to say that the market has caught up with the listed companies for the first time in years.

Many might link the present market surge with the homecoming of Mr Sharif after four years of self-exile. But that is just a coincidence even if his return brings a semblance of political stability to the country. The present spike in the market is driven mainly by growing expectations of a cut in the interest rates going forward, an improving exchange rate due to action against illegal forex trade and dollar smugglers, falling petrol prices, and, last but not the least, the agreements signed by Pakistan with China for enhancing the bilateral economic cooperation on the sidelines of the Third Belt and Road Forum in Beijing earlier this week. A balanced current account for the last month and hopes of a successful review of the IMF programme must also have played a part in uplifting investor sentiments. But concerns remain that the present spike might be temporary and that some big investors could be manipulating the system. Such worries stem from the very low public participation in the retail stock trade as only 0.1pc Pakistanis have invested in shares compared with 61pc Americans, 13pc Chinese and 8pc Indians. Unless the number of retail investors increases, the stock market will remain unhinged and at the mercy of large brokers and investors.

Published in Dawn, October 21st, 2023