HAS the KSE-100 share index only one way to move-up and up, almost non-stop and moving the other way is the mischief of the bears. If that be so how high can it reach and sustain itself endlessly as the merry bulls hope for. They are an increasing number in these times, while the number of the bears are diminishing.

Earlier the target of the index was 5000, then 6000, 7000,8000 and then 9000 and 10,000 and at that point the leaders of the KSE declared the sky was the limit for the index to rise. The earlier peak reached in 1994 was only 2661 points which seems much too small compared to the current pyrotechnics.

But after the index crossed 10,000 by mid- march, it crashed, while the KSE leaders were hoping to push up the index to 14000, that is way above the New York and Tokyo indexes. Then the KSE index came down to around 7000 and last Monday it was 8247.

Until recently the KSE index was a 1000 points or more below the Bombay sensex of 30 shares. But in recent times the Karachi index, though of 100 shares is far ahead of the Bombay Index.

While the KSE-100 share index is now around 8247 the Bombay index is 7943 points after it had fallen in local currency from December last by 13.3 percent. And in dollars by 11.3 percent. The Karachi Stock Exchange claimed to be the best performing exchange in Asia or the world now, and its index is below the old international indexes like the Dow Jones of the US which is now 10324 or the Nikkei index of Japan at 13417, the technology NASDAQ index in New York now stands at 2063. Closer home, the Malaysian Index is 905. The fact is that too many persons and institutions have a vested interest in keeping the KESC 100 index very high. Javaid Umar Vohra tried his hand, failed and left the exchange after some initial success.

Persons with large holding of blue chip shares don’t want the share prices to come down. They might have taken large bank loans against them and if the prices fall sharply they may have to return a part of the loan or deposit more shares, which they might now have.

Banks have now a large stake in holding up the prices of shares as they have made large investments and profit by them. They will not want the share prices to drop and create a host of problems for them. The corporate institutions also own a large number of such shares and they want their prices to be up all the time.

Sponsors of companies have pledged their shares and obtained large bank loans. Until recently, before the CDC came up they used to pledge duplicate shares illegally. Such sponsors do not want the high share prices to come down. Even Modarabas and leasing companies have made large investments on shares, instead of using their capital for the purpose for which they were set up. And they do not want the share prices to come down.

In such a context, the bears have become few and the bulls many and all of them have a common interest in pushing up share prices. Share prices are very high now also because corporate profits are high at the moment and their chiefs are distributing their profits as cash as well as bonus shares. What really matters is the P/E ratio, that is the price and earnings ratio which is very favourable for the blue chips.

Even the banks are making large profits. Some of them made over 100 percent profits in six months, while paying token amounts to depositors. Hence the bank shares led by the National Bank scripts are very popular with the shareholders.

Oil companies are doing exceedingly well and distributing their profits liberally. And the number of oil and gas companies in the market has increased following the full or part privatization of many oil companies.

In a market in which too few companies were getting enlisted on the KSE, a dozen large companies have come to the market in a year. While oil and gas companies are distributing large profits in the face of public protests against high POL prices, the company chiefs are not reducing their prices and instead prefer pleasing their shareholders and the directors of the petroleum companies.

A foreign consumer products company makes a very large profit and sends as much as 470 percent as dividend abroad to its foreign majority shareholders. The protests of the consumers are not listened to by the government or the companies, not even in the oil sector when oil prices are at their peak and may stay their for long.

The government has also developed a vested interest in high share prices or in a high KSE index. A soaring index is held forth by the government as a badge of success of official policies and the soundness of the economy. So it is not anxious to see the index drop down.

When it comes to foreign portfolio investment that is small and held by those investors only for a short period. They had their fingers burnt badly when they bought PTCL shares at Rs55 abroad in 1994. After the deal the prices went down sharply and remained in the range of Rs20’s for very long. Many of the foreign buyers sold out their shares at a heavy loss and kept out of the Pakistani stock market for long. They did not come in while the index was soaring and later made a modest entry compared to the far larger investment they had made in India.

They said there was too much gambling in KSE and real transactions were few compared to the claims of vast transactions, which made the sober investors giddy. There are too many television channels specializing in the stock market with KSE bigwigs appearing on them and blame everyone else except themselves. Mr Moin Fudda as managing director of the KSE tried to introduce several healthy changes but he could achieve only partial success in the face of the big fish prevailing on the exchange insistently.

The PTCL has been a bone of contention on the exchange ever since it was quoted in 1994. After its listing, the prices went down sharply and it is a troubled share now when the ownership of the company is intended to be transferred.

What is needed now is a balanced approach with enough attention being paid to the interests of the small shareholders and of consumers of companies whose shares are publicly quoted.

The government has to take a real and healthy interest in the stock market, instead of holding a high KSE-index as a badge of its economic success. Lopsided economic policies cannot be a lasting success in a difficult country like Pakistan, if the NASDAQ index in New York can be 2076.48, while the Dow Jones index is 10324 in the same city , the Karachi 100 index need not always be going up and up and then crashing, leaving innocent small shareholders in distress, while the big fish go on to make more and more money as bulls or bears.