THE relentless bulls have pushed away the bears — at least for now. The benchmark KSE-100 index touched a new record of above 59,100 points on Friday, despite profit-taking towards the end of the day due to the culmination of the rollover week. Helped by excellent corporate profits, reduced economic volatility, the successful conclusion of a staff-level IMF deal, expectations of a post-poll ‘stable’ government and optimism about the early reversal of monetary tightening, share prices have jumped rapidly in the last three months. The return of foreign institutional buying has also played a part. The share index gained 3.5pc week-over-week and increased by nearly 45pc from its end-December level. Many analysts feel that the valuations still remain attractive in spite of the recent sharp rally as the market recoups the losses of the last six years. The market’s current bullish march is impressive considering that the Pakistan Stock Exchange, which was the worst-performing market at the end of 2022 in dollar terms, is now being ranked among the best-performing bourses worldwide since end-August.

But for how long will the bears stay on the sides before returning to their rampage to pull down share prices? Much of the answer hinges on how the economy behaves going forward and whether the government is able to woo the promised foreign investment from ‘friendly’ Gulf nations to improve Pakistan’s balance-of-payments position and kick-start growth. The recent macroeconomic recovery remains fragile as it has been achieved through short-term fixes such as cuts in development spending, implementation of import curbs, and imposition of indirect taxation and administrative actions. The structural weaknesses dragging down the economy and growth also remain entrenched and unaddressed. More crucially, the longer-term bull reign will depend on political stability after the elections. For now, investors are holding on to hopes of continuous improvement in the future economic outlook, and the installation of a stronger government with a credible and clear public mandate to take tough decisions and negotiate a bigger and longer-term deal with the IMF. This is not the first time PSX has been ranked among the best performers in the world. The question is: for how long can it hold on to this position?

Published in Dawn, November 27th, 2023