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Jan 27 - Feb 02, 2003 

The boom in the markets in Pakistan is the subject of discussion of all economic forums and business houses.

Seen in the international context it is a rare phenomenon. KSE registered unprecedented rise of 112 percent during 2002 and is still climbing while almost all the world markets have been hit by worst slum during this period. Except for Colombo, which managed a gain of 36 per cent, all market across the world had hit the floor during 2002. The European bourses and US Dow Jones plunged to their seven years low. As against this Pakistan's stock market is bashing in the limelight due to unprecedented rise in the index in recent months. The KSE has started 2003 on a refreshing note.

Commentators across the country are trying to establish a link to the factors and perhaps even the institutions/"people" responsible for this phenomenal growth. While some attribute this to surplus liquidity, interest rate rationalization and overall reforms, others talk of regulatory framework or even a mere bubble. But can an institution alone take credit for the performance of the market? And if so, would this institution also accept the responsibility when the boom period ends and the bears take charge?

At this time of hope and skepticism from various commentators trying to develop casual linkages for the exceptional performance of the stock market, perhaps the most significant comments would be of the Chairman of the capital market watchdog. PAGE approached Khalid A. Mirza, Chairman of the Securities and Exchange Commission of Pakistan, who has never, in any of his public utterances, acclaimed credit for the market rise, to comment on his opinion of the factors responsible for the stock market performance over the past 6-8 months and who should take credit for it.

He commented as follows while talking to this correspondent in his office in Islamabad.

Over the past three years, the SEC has been taking measures to restore the confidence of investors in the capital market. The nominal rise and fall of stock markets is not something of a major concern to regulators the job of the regulator is to ensure that there's no foul play and there are no systemic crises and that is what the SEC has been focusing on. Therefore, I can only comment on the reasons for the rise in investor confidence; not attribute factors to the rise in the stock market.

In our considered view, the major reason for this enhanced level of investor confidence in the stock market appears to be the implementation of structural reforms focused on governance, transparency and efficiency of the market. It is the market perception that attracts investors. Furthermore, the macroeconomic reforms of the government have created a backdrop for these reforms which have been supported by higher levels of liquidity, macro-economic stability and interest rate rationalization.

However, the market rise, which seems to be the question on everyone's mind, is more of a sentiment than fundamentals. It always takes a futuristic view.


Before answering this question, I would like to make one thing unequivocally clear. The SEC does not, repeat not, take any credit whatsoever for the rise in the market. We have never taken any credit for this nor will we ever do so! No regulator should claim any influence over market movements, direct or indirect. It would be stupid for us to suggest that regulatory actions or measures on reforms have carved the market to go up. Anyone who says that we have ever claimed credit for this is either a liar or totally diabolical.

Furthermore, in the opinion of the SEC, no institution, especially the government or SEC, can or should take credit for the improved performance of the market. There could be a number of factors for market rise. Markets go up and down that is natural. What is imperative though, is for the regulator the SEC, to ensure that the market functions in a smooth and transparent manner. The SEC is vigilantly observing the market and is pleased to see that the regulatory mechanisms put in place are working towards minimizing elements of systemic risk and other possible defaults.