Unstoppable bull run

The Pakistan Stock Exchange surged past the 90,000 mark, setting a new record as the bullish trend continues. The stock market has achieved one of its best performances in recent history and has recorded a 137 per cent gain in less than two years. With fears of a financial default receding and signs of stability emerging, investors have recouped their losses from the past two years. This is not the first time that we have witnessed the market go on a wild ride. The PSX witnessed a similar comeback in 2010, as it rebounded from the global financial crises. Another factor contributing to the new highs achieved by the stock exchange is the expected rate cut by the central bank on November 4. Traditionally, when the central bank cuts the interest rate, investors either flock to gold bullion or stocks to maintain their return on investments. In its July report, the IMF forecasted Pakistan's growth rate to be 3.5 per cent, higher than last fiscal year's 2.4 per cent. Global rating agencies have also improved Pakistan's rating after the IMF's show of confidence leading to a more positive economic outlook.

However, it must be emphasised that the psychological barrier of 90,000 points makes for good headlines and sale pitches but has little bearing on trade decisions. While some industrial and commercial sectors have displayed a strong performance, others have had lukewarm results. The performance of the stock market does not either indicate the health of the national economy. Foreign investors are not rushing to the PSX to invest and at times, the short intraday surges lead to equally strong dips of selling. When bulls run the trading floor, it can create the allure for small and new investors to invest in stocks. Brokers use such periods to offload non-performing stocks, hence, it is better to make wise rather than hasty decisions. And while times are good, the buyer should still be cautious.