KARACHI, April 4: Like the early nineties, one can see saliva dripping down the mouth of everyone from the corporate executive, to the barber, the shopkeeper and the doctor, as they watch the next-door neighbour making fortunes by putting money in the stock market and sitting back to watch it multiply, while they toil through the hard day’s work.

At the Karachi Stock Exchange the stock prices are piercing through the roof. On Friday, the KSE-100 index closed only 25 points short of the incredible mark of 15,500 points.

The fear of return of great depression that worries the developed world and the turbulence in stock markets around the globe, have passed by the Pakistani bourse without causing the slightest dint of damage.

The KSE-100 index has already gained 10 per cent in the three months of the current calendar year, quite in contrast to the Morgan Stanley Composite Emerging Market Index, which has lost 8 per cent of its value in the same period.

The first quarter of 2008 for Asian stocks outside Japan has been the worst in over 5 years. Neighbouring Mumbai’s Sensex index has, meanwhile, dipped 23 per cent.

At the forefront of the reasons for a charging bull in the Pakistani bourse is the great expectation of return of political stability, following the peaceful transition of power and the extraordinary ‘brotherly’ relationship that currently prevails among major political parties and their leaders.

The international brokerage house reports and even the world media have joined the chorus of appreciation: “Pakistan could become cash magnet if new government passes some tests,” wrote the Wall Street Journal in its edition of April 2.

“Those missing the boat on profits (in the equity market) do it at their own discretion” writer Niraj Sheth says, adding “The Pakistani market has a strong record of growth for 33 per cent in the past decade”. The market is marching ahead though “foreign capital — which stopped coming in because of the nation’s political turmoil — is still sitting on the sidelines”, Sheth wrote. Analysts here concur.

During the first quarter (Jan-Mar), foreign investors were ‘net sellers’ in the sum of $78.5 million. The impact was minimised due to strong support by individual and institutional investors in the country, analysts say. Historically, locals have followed the footprints of overseas investors. But all that has changed.

“The investment from abroad is welcome,” says Tayyab, who handles institutional sales at a brokerage house, but he contends that in determining the direction of the market that is not of much moment now, for foreigners hold only 6.7pc of the Pakistan’s total market capitalisation (24 per cent of the available free float).

All that rosy picture aside, economists point to the challenges ahead, which are momentous, principally the repair of a shattered economy plagued by a budget shortfall, staggering current account deficit and runaway inflation.

Temptation of making it rich overnight through equity investment is great, but so is the dangers lurking in the dark. At the peril of upsetting the apple cart of thriving stockbrokers, investors need to be cautioned to look before they take the plunge.

History teaches, that many stock market crashes at the KSE have occurred, when the index has hit its high point. Nobody is sure that this really is the peak, but it would be wise to let the factor of fear remain slightly ahead of that of greed.