T feels a little like déjà vu. The economy is in a sluggish `recovery` of some sort, with the growth rate showing signs of a faint pulse. Meanwhile, the stock market in Karachi has raced ahead, surging by 49pc in the year 2013, and another 49pc again since January of this year, crossing a historic threshold of 30,000 points last week. As is to be expected, this surge has been accompanied by euphoria in the fraternity of stockbrokers, who are busy selling the phenomenon to their clients as evidence of the `resilience` and vitality of Pakistan`s financial markets. As part of this larger sales effort to entice small savers into the market, brokers and their sales teams are telling us that Pakistan is the best performing stock market in Asia after Japan, that the rally is being fuelled by foreign investors, that it represents the confidence of investors in the smooth transfer of power that took place last year, and that the most recent boost in share prices is linked to the upgrade in the outlook on Pakistan that Moody`s has just announced.

All this is fine. And it is important to acknowledge that a rally in the stock market has been under way for more than three years now. But the small investor is still advised to be cautious about the excessive euphoria that is being peddled by the brokers. The same fraternity has, in past rallies, been known to sell snake oil to its clients, and grounds exist for buyers to remain vigilant against a repeat of the 2005 and 2008 crashes. It may be easy to see the rally in the stock market, but it is not easy to see its links to any developments in the real economy. All we can say with confidence is that money is coming into the stock market in large quantities, and much of this money appears to be coming from offshore accounts, thereby showing up as `foreign investor interest` in the local bourse.

However, these inflows could just as easily be connected with a tax amnesty on stock purchases announced in January 2012. In this situation, restraint on the part of the small investor is necessary, and until more is known about where exactly these funds are coming from, it would be better to maintain an overall sceptical view of the claims that are being made by the brokers today.