KSE dilly-dallies

January saw KSE-100 at its highest level since June 2008; it also saw average turnover increase sharply hitting a 9-month high of 170 million per day.
The support, as has been the case since many months, came from the foreign actors. Foreign portfolio inflows in January stood at $63 million, with the supply coming from all local actors; $7 million by banks, $12 million by mutual funds, $24 million by individuals and $19 million by local companies.
The key triggers were also usual: corporate earnings, efforts toward reaching a political consensus on how to pull the economy from abyss, hopes of margin trading system, and the relative discount to the region.
Despite all these talks of optimism, however, greed and fear seem to have begun playing a tough game of tug-of-war at the bourse more recently.
After rising a whopping 830 points in ten trading sessions to 12,681 points on January 17, the market has been tapering off since then - albeit the fall has not been sharp, as previously feared, as foreign investments continue to pour into the market.
NCCPL data show that foreign investments totaled $22.7 million between January 18 and February 3, whereas the market eased off by 2.5 percent or 322 points.
The direction from this point onwards seems dubious. The word on the street is that last Mondays erratic correction was orchestrated by a bank and two particular brokers.
The story goes that the bank alone sold equity worth of Rs500 million in a single go to enforce market correction - so perhaps they could join the rally which they reportedly missed. If thats the truth, then the benchmark KSE could be breaking through the psychological barrier of 13,000 points sooner or later.
But then again, all market talk isn necessarily true. Besides, who can really know the real intention of the alleged forced selling - perhaps the seller simply wanted to get out in a rush, on account of late realisation of the countrys economic blues. If thats the case, then perhaps, the sellers made the right move, since the intensity of the countrys economic blues isn clandestine information by any means.
The SBP has chosen to maintain status quo for the next two months, on what can be termed as the Kardar fallacy (without any disrespect to the qualified gentlemen) of having faith on politicians who evidently cannot be relied upon).
Yet, in no uncertain terms, the SBP confirmed once again, the fears that Pakistans economy continues to be in a very poor shape and any "further delay in implementing critical structural adjustments risks significantly increasing the future costs to the economy."
Clearly, if the Kardar fallacy proves to be true, then, a further hike of 100 basis points would but be inevitable, and what would happen to equities is better left unsaid.