KSE’s upward journey

To say that a rise in the Karachi Stock Exchange (KSE) benchmark 100-share index is reflective of how the investors are thinking would not be an overstatement. The index closed at 31,303.63 points on November 11, entering new territory each day as it records an increase. Crossing the 31,000-point barrier was an achievement itself, but seven successive times of ending in the black and expectations of better days ahead make the KSE an interesting case study.



Investors trade in stocks on expectations based on current developments, financial results and the general outlook of the country’s economy moving forward. Of late, numbers in this regard have been revealed to be improving and that has attracted interest. Inflation figures hit a 17-month low, development schemes have been announced, hopes of the IMF releasing the next loan tranche of $1.1 billion are building up, the rupee is appreciating and energy deals with China have been signed. These are some major news items that have driven the KSE’s good performance.

But, while these factors begin to explain investors’ interest, they do not dictate their investment. Announcement of loans for the country’s youth, the government’s Rozgar scheme, oil discoveries, and mergers and acquisitions determine interest in a stock, which in turn is reflected in its share price. Strong financial results and growth prospects will also steer the share price northwards. The KSE reflects the mood and sentiments of investors, which is often influenced by political events in the country, particularly in Karachi, the country’s financial hub. Common sense dictates that such events should not necessarily have a huge impact on investors and profitable companies. But, as is so often the case, the reality is quite different. The sit-ins in Islamabad seemed to have unsettled the KSE’s mood when they first started, but three months later, the case is quite different. The reasons behind the KSE’s rise can never be explained fully, as investors consider different factors before trading. Its current performance indicates that they believe the country’s immediate economic future to be relatively stable, with no major storms on the horizon. How long this belief sustains, however, is another matter altogether.

Published in The Express Tribune, November 13^th, 2014.

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