As bears bond with KSE equities

If KSE authorities had held an award for the driest week of the fiscal year 2010, last week could have been a strong contestant.
Trading volumes in the top 100 firms shrank to just 53 million in the week ending June 25 that saw the benchmark index rise by 1.6 percent. The rise, as has been the case since last June, came on the back of foreign investments that totalled $21 million last week.
In other words, despite all the so-called attractive levels, local investors remained on the sidelines with major selling by individual investors who remain wary of the CGT.
With CGT issues now resolved amid hopes of margin trading seen materialising over the next few weeks, one can perhaps expect the market to rise with higher volumes - coinciding with the conclusion of Fifa fever that historically tends to arrest both turnover and gains at the KSE.
But that would be an over simplified view.
KSEs slide from its recent peak of 10677 points hit in April didn just reflect the crisis of taxation or the crisis of liquidity. It reflected both. But more importantly, it reflected growing uncertainties over what local capital market economists often like to call he macros.
Included in the list of uncertainties are the threats of debt trap and the governments fiscal slippages in the backdrop of lower and slower foreign inflows.
Other worries on many minds include the stickiness of inflation and its corresponding influence on the central bankers who are seen sitting agile to counter the inflationary dragon with one monetary tool or another.
Pricing-in the chanciness of these macros, bond yields have been gradually ticking up. Yield on the benchmark government paper has inched up by around 17 basis points since mid-April - sending the stock market lower by 8.25 percent during the same period.
And if yields keep ticking higher any longer than usual, don be surprised if the uncertainties resolve on the downside.