The Telegraph
Since 1st March, 1999
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Feel-good factor crosses border on a raging bull

Aug. 7: When the closing bells rang and the scores blinked to life on the screens, the players’ faces beamed — in Karachi as well as in Mumbai.

Unlike cricket, cash knows no borders.

Market players in Karachi were celebrating today a euphoric rise in share prices, which took the stock exchange barometer to an all-time high of 4224.83 points.

The KSE-100, an index reflecting changes in the prices of 100 indicative shares, ended the day lower at 4204.68 but it still was over 100 points above Wednesday’s close.

When Karachi smiled, so did Mumbai. Share prices on the Bombay Stock Exchange renewed a week-long rally after a pause. The sensex, the KSE-100’s Mumbai cousin, rose to 3816.16 before closing at 3806.83 today.

Investor confidence is riding high on both sides of the border. In India, it is fuelled by good monsoon and first-quarter corporate results.

In Pakistan, an impending deal between the government and the Opposition over constitutional matters is being seen as one of the reasons for the bull run — market jargon for a sustained spurt in share prices.

A bigger factor could be international. “A major reallocation of funds from the developed markets to the emerging markets is happening. And as an asset class, the emerging markets story is becoming more attractive. Statistics reveal the steady flow of funds in the past few months from leading markets into emerging markets,” said a strategist with a global funds manager in Mumbai.

“The market went bullish mainly because it had large number of buyers and sellers,” the president of the Islamabad Stock Exchange, Chaudhry Muhammad Sharif, told The Telegraph.

Some analysts in Pakistan expect the index to cross 5,000 points, predicting big investments, particularly by local investors who seem to have moved funds from real estate and saving schemes to stocks. Like India, Pakistan has over the last one year brought down interest rates on saving schemes, prompting many to try their luck in shares.

Not everyone is so optimistic in Karachi. Several foreign investors are still to forget the jitters of 1998. The nuclear detonations then and the resultant sanctions had prompted several of them to pull out. Before the economy could recover, the September 11 attacks followed, sparking a fresh round of investor exodus.

But Pakistan did benefit from the cooperation with the international coalition against terrorism, bagging $11 billion and persuading big donors to reschedule debt.

The ADB had raised its lending limit to $2.6 billion over the next three years as a recognition of greater macroeconomic stability and effective debt management. For the share rally to survive, such positive factors should outweigh the negatives.

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