A word of caution: the stock market is not the real economy. While measures like the inflation rate or the balance of payments reflect actual goods produced and traded, the stock market is merely about expectations. However, because of the sheer diversity of economic activity that it encompasses, the stock market is considered the barometer is how the economy as a whole is doing. It can thus be safely said that if the market is rising, something must be going right. On Thursday, for the second consecutive day, the market broke a new record, with the benchmark KSE100 Index closing at 67142.12, up 594.34 points on Wednesday’s close of 66,547, which itself had set a record, beating the previous peak of 66,427 on December 23. The development to which the market seems to have reacted is that the PIA privatisation.is moving ahead, with the PIA BoD approving the transfer of assets and liabilities to a holding company. On Wednesday, the BoD of the newly-minted PIA Holding Company then approved the restructuring of PIA’s debt, and the transfer of Rs 268 billion to the government.
However, PIA is not all that is happening, though behind that is the heightened expectation of a deal being struck with the IMF. It is that hope of a new deal with the IMF, on a multi-year multi-billion-dollar programme, that may be driving the market. The foreign-investment scenario seems to be positive, while the price-to-earnings ratios have encouraged an across-the-board investment. It almost seems as if the market hung back and delayed its judgement on the new government, but is now giving its thumbs-up.
The bull run is buoyed by good returns being reported for banking companies, which have been profiting from the high interest rate set by the State Bank. There have also been rises in the prices of oil and gas companies, both exploratory and refineries, as well as in cement. The government seems to be showing wisdom in refraining from any crowing about the rise, because it will equally refrain from any bear runs. Those are inevitable, and just as a bull run does not improve anyone’s prospects, a bear run doesn’t ruin them either.
