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From SHAMIM AHMED RIZVI
Islamabad
 Feb-18  24, 2002

The share markets in Pakistan boompassed another mile stone last week when bulls pushed bench mark index up by almost 8 per cent crossing for some time on Friday, the psychological barrier of 1800 in Karachi stock market.

The market index is constantly on the rise for the last many in weeks but last week upsurge was rare in the history of share market in Pakistan. The last week buying eupharia is believed to have triggered by a hope of fresh economic package expected to be announced by the US in the wake of President Musharraf visit to that country.

Even before September 11 the KSE-100 index was touching 1200 lows with the possibility of a downward plunge. But remarkably the market declined and bounced back sharply. This is definitely not in keeping with any normal market's reaction to a crisis in the region, and certainly not the KSE which has been previously demonstrating sharp movements in reaction to political developments. Over the last many weeks, the KSE has shown remarkable resilience and experienced an unexpected sharp rebound which as yet does not seem to have lost steam.

A number of factors seem to be responsible for the persistent upward movement of the KSE-100 index. The index would have shown higher gains had profit taking was not common. The factors which have contributed to revival of both institutional and retail investors in equities market are: 1) the GoP and SECP efforts to deploy large funds through market support funds, 2) improved sovereign rating, 3) a spate of foreign buying. However, some analysts attribute the upward movement of index to announcement of financial results and attractive yields and a forecast for yet better results for the year 2002.

The rising trend in the stock markets in Pakistan led by Karachi stock exchange KSE started in early October last year when US led war in Afghanistan was in full swing. It appeared to be an unbelievable phenomenon and market experts described it just as another bubble caused by stock speculators. When this correspondent approached the Chairman Security Exchange Commission of Pakistan (SECP) Mr. Khalid A. Mirza for his comments he made a prophetic statement which was published in PAGE issue of Oct. 29, 2001. He said "The present upsurge in the stock market is not a speculative bubble through over trading like May 2000. It is genuine rise and is likely to sustain itself".

Commenting on the prevailing market conditions, he said that a positive movement in the stock market was due because it had been under bearish trend for longtime. The market was improving quickly as yields were high and the investors were now feeling more confident because of the reforms measures taken by the SECP and the tight regulatory framework and close monitoring of the stock markets. This has also attracted the fund managers towards Pakistan Markets. Expatriate Pakistanis have started bringing money and the institutions have also joined in, he said adding that the result first phase of capital market reforms was very encouraging. The SECP was however, watching the situation very carefully but there appeared no need to take any further step in the near future, he added.

Replying to a question regarding likely impact of September 11 events in the United Sates, Mr. Khalid A. Mirza, said that the impact of this tragic development and its aftermath was felt all over the world and Pakistan was no exception. Despite being on the frontline, however, Pakistan did not shape very badly by loosing about 13 per cent of its stock market as against an average of over 15 per cent in other Asian Markets.

The market remained closed for an entire week (Sep. 17-23) as the three stock exchanges in the country unanimously took the decision. It was though better to close the market if there is destabilizing event the most important factor behind the closure of the market for all five working days of the week, was the withdrawal of carry over or Badla trade financiers which affectually threatened to destabilize the market. While Badla finance needs doubled the major finances were not coming forward and that was really upsetting the market. The SECP addressed this question of Badla financing with the State Bank of Pakistan and five major banks of the country. The role played by National, Habib, Muslim, United, and Allied Banks was commendable as they injected over Rs.3 billion into market as Badla financing. That was felt sufficient to reopen the market on September 24 alongwith 5 per cent circuit breaker and complete ban on bank selling. Continuing Mr. Mirza said that SECP, however had always felt that this decline was cyclical and the market would soon start consolidating. From a regulatory point of view market now is on sound footing as the reforms initiated by the Commission were proving effective, the expectations proved correct.