Whats all this hoopla about gold, when the dear old KSE bull has fared stronger than the so-called safe haven since January last? Quite possibly its the bullish bias at the local bourse that has helped Karachi stocks beat gold in the year to date and may help beat even more.
In fact, had there been even an iota of possibility, local pundits would have pushed the benchmark KSE much higher in an attempt to outperform the roaring equities in China and India, based on their expectation of about 2-3 percent GDP growth, vis-à-vis a consensus forecast of 6-8 percent growth in the giant Asian economies.
That remote possibility, however, does not seem to exist for now, despite the monetary easing and the apparent sanguine state of investors suggested by a the survey conducted by AKD Securities last week. Perhaps, thats because the central bank has acted as a party pooper -asking them to take it easy and watch out for the fog ahead.
The State Bank painted caution on three important canvasseses; inflation, fiscal balancing in the backdrop of uncertain and much too postponed non-IMF foreign inflows and overall level of risk and uncertainty that has considerably increased in the present law and order situation.
But one area where SBP remained silent is politics; notably the pre-occupation of lawmakers with a in perhaps the biggest Pandoras bBox in Pakistani political history: the National Reconciliation Ordinance - something which Citi Investment Research & Analysis says may not rock the boat. "The exchange rate and Pakistan sovereign bond have typically been the leading indicators of a potential regime change. These indicators for now are not hinting at any government change," noted Citis Equity Strategy released last week.
"The market may come under pressure initially, but we expect its focus to soon switch to an expected rate cut in this weeks monetary policy, IMF tranche and promised flows of $1bn in December," the report added. Two things, however, seem to be at odds with this view.
First; while there might be no point conjecturing about it, recent political history suggests that things might worsen nearly to the point of rupture before they get any better. Whether it was the lawyers march towards Islamabad earlier this year, the sugar crises, or the required validation atification of CCP Ordinance by the parliament, things have been pushed to the edge for one reason or another.
Second; given the seasonal slowdown in pre-Christmas profit taking foreign portfolio inflows - KSE major thrust of late - can be expected to have the same vigour until the start of next year.
Besides, after having remained flat in roughly the last seven sessions with depressed turnover of an average 83 million, the bulls can just get up and start marching to celebrate the New Year at 10,000 points, as widely expected by the 40 percent of investors surveyed by AKD. The bulls, chartists say, need to graze grounds around 8400-8700, may be even lower according to more pessimistic ones, to prepare for their final northward move by spring next year. Even if the market chooses to ignore the central banks concerns and the political noise, one thing is for sure; the mishmash of views will likely keep the market behaving rather strangely than expected.
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