Can Karachi Stock Exchange hit 40,000 points in 2015?

With the beginning of the new year, 2015, the Karachi Stock Exchange has achieved another milestone by crossing 33,000 points on Jan 8, 2015.

A day before hitting this all-time high mark, the benchmark index of the KSE breached the 33,000 points during inter-day trading, but before closing of the marketing the index slipped below this level. Karachi Stock Exchange was supposed to hit 33,000 points level any time in Dec 2014, but the Peshawar tragedy that took place on Dec 16, eroded 813 points because of mourning and barbaric killing of the innocent school-children and teachers. Had that tragedy not taken place, the KSE-100 index would have excelled the 33,000 points before the start of the new year.

Now the political scenario had changed entirely after the Peshawar tragedy and the government, army and law enforcement agencies are now working on the strategies to eliminate terrorism.

The unity shown by a vast majority of the political, religious parties and general public has supported the government and military in going forward in their mission of eradicating the terrorism and this renewed zest has ended over six months long hostile political environment in the country.

In the prevailing political situation, the stock market analysts and investors believe that the Karachi Stock Exchange is now on way to hit 38 to 40 thousand points level in 2015.

Declining world crude oil prices, improvement in the foreign exchange reserves to around $15 bil- lion and stability in the rupee-dollar exchange rate would contribute to economic stability growth and pave way for investment in the country, particularly in the stock market and the real estate.

According to annual report of the Securities and Exchanges Commission of Pakistan (SECP), the year 2014 was a year of growth and exuberance for the Pakistani capital market as throughout the year the KSE-100 Index exhibited outstanding performance and touched historic, unprecedented levels in terms of value and volume.

According to Bloomberg, Pakistan ranked third in 2014 amongst the Top Ten Best Performing Markets in the world. Also, Pakistan has been able to secure a place amongst the Top Ten for the third consecutive year now. Moreover, in the MSCI Asian Frontier Markets, Pakistan ranked number one - outpacing Sri Lanka, Vietnam and Bangladesh by a big margin.

In 2014, the KSE- 100 Index gained 6,870 points thereby generating a handsome return of 27% ( 31% return in US$ terms). The year 2014 will also be remembered in the Pakistani capital market history for mega public offerings led by sale of shares by the Government of Pakistan, and in terms of money raised through these offerings. Total offerings in the year 2014 reached 9 as compared to 3 in the year 2013. After a gap of seven years, Rs73 billion were raised through offerings in 2014 as compared to a meager Rs4 billion raised in 2013. Higher foreign inflows during the year can also be counted as a major market impetus. Foreign investors, that hold US$ 6.1 billion worth of Pakistani shares - which is 33% of the free- float ( 9% of market capitalization) - remained net buyers in 2014.

This positive performance of the capital market can be attributed to a number of favorable factors, both at the political and economic front. As enu- merated above, substantial foreign investments in the equity markets which captured considerable free float of the market, declining dollar-rupee disparity and Government of Pakistan's secondary market offerings played a major role. Other key factors which can be seen as contributing to the market's bull-run are Government's business friendly reforms, improved macro-economic indicators including record forex reserve levels increased confidence shown by international donor agencies, Government's energy sector initiatives, significant interest shown by China to invest in Pakistan, and Government's plans and initiatives towards fasttrack privatization.

The newly appointed Chairman of SECP Zafar Hijazi feels that Pakistan's capital market should continue its topper's position in the new year as well, nevertheless should also qualify among the world's most transparent and fair markets, providing the best opportunities to the investors. The incoming Chairman has already embarked on implementing a robust reforms agenda for the capital market primarily focusing on strengthening of the market monitoring and enforcement regime and introduction of structural reforms for market development and its outreach.

As one of the first major steps, the Chairman has immediately doubled the human resources and infrastructure strength of Market Monitoring and Surveillance function, enhancing the scope by monitoring of capital market related discussions/programs/news on the print and electronic media including analysts' recommendations, investing tips/strategies to their clients/general public. These preliminary actions reflect the apex regulator's unwavering commitment towards protection of investors' interest and rebuilding of a fair, efficient and vibrant marketplace which will continue to contribute positively towards the country's economic growth in the years to come.