THE stock market keeps crossing all-time high` every now and then. Recently, the KSE-100 index crossed 109,053 points for the very first time in the history of Pakistan. The KSE-100 is an index of the top 100 securities listed on the Karachi StockExchange andiscreatedbecause it represents about 80 per cent of market capitalisation, which is the best possible representation of stock market performance. Capitalisation is the number of free float shares multiplied by the market price of a share.
Due to limited access to financial institutions, and poor knowledge about investing, people from the middle class do not generally invest in the stock market.
This leaves space for the elite to create an artificial demand for company shares.
It is this monopoly that creates inflation in shares` prices.
Capitalisation can be increased in two ways; either by increasing free float shares, or by a spike in the price of the shares. Reviewing the financial statements published recently by all KSE-100 companies, one can find that it is only the increase in share prices that has increased capitalisation.
In effect, it means an economic bubble hasbeencreatedbythesharkstotake away retail traders` money through artificial demand. The stock market in Pakistan is basically a gambling arena controlled by the mighty.
People should never buy shares without first gaining sufficient knowledge and understanding about investing in stocks.
