A healthy stock exchange

The Karachi Stock Exchange 100 index finally crossed the magic number on Thursday, January 26

After hovering around, and briefly crossing on Tuesday 24^th January the 50,000 points mark, the Karachi Stock Exchange 100 index finally crossed the magic number on Thursday 26^th January. To the common man, unfamiliar with the ways of the financial markets this means very little beyond being a signal that something is going right in Pakistan and all the more welcome for that. For the professional money-men and traders it has rather more significance. The Index has been moving upwards since last November, and with the addition of Rs60 billion on Thursday the market capitalisation of the Pakistan Stock Exchange has reached Rs10 trillion.

Investors are fickle creatures. They want to make money for themselves or their clients and respond to a range of stimuli, from the weather to the state of the power industry to the overall security environment in the country. It is the latter that is significant in this recent rise. Investors gain confidence as the numbers of terrorist incidents drops. This is true of foreign investors and once an exchange gathers confidence and consequently profile internationally, the money is not far behind. The year 2016 provided a record return of 46 per cent and investors are said to have ‘flocked to the market in droves.’

Beyond a reduction in insecurity and a stability of governance notwithstanding the Panama Papers affair, the regime of a low interest rate and an expectation in growth of corporate profits play a part in the rising value of stocks. There is the prospect of linkages with Chinese financial institutions. Although slower than in 2015 the Chinese economy continues to grow, and the Chinese engagement with Pakistan increases by the month. Crossing the 50,000 mark is a potent optic that transcends mere symbolism, but turning the optics into a sense of being less poor at the bottom of the pile remains a challenge.

Published in The Express Tribune, January 28^th, 2017.

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