Stock market punters never pay attention to the sound of bears; do they? Perhaps the fault is in their stars. After all most stock markets around the world – save for a few exceptions like Frankfurt, Germany - boast an aggressive or a dominant bull (sometimes even two as is the case in Hong Kong) signifying the Zodiac sign of Taurus that dictates a tempting excess in pleasures and material goods along with a general sense of hotheadedness.
A few days after the final Panama judgment, BR Research published a piece titled “Is it the ‘end of uncertainty’ at the PSX?” That piece argued that while Pakistan’s stock market seems to be responding positively to the ousting of Nawaz Sharif from PM office, investors should not throw caution to the wind as the bears appear to be emerging from their sleep. (See Aug 1, 2017 column for a host of political uncertainties discussed in that space).
The market, however, had a mind of its own as investors pushed the benchmark PSX north, managing a gain of nearly 1200 points in the days immediately following the judgment. But that was it. Since then – from Aug 4 to be precise – the market shaved off ~5100 points until the close of Aug-22 session.
Yesterday the KSE-100, PSX’s benchmark index, did bounce back by 927 points. But there are at least three reasons to suspect that further erosion of values at the bourse cannot be ruled out – possibly even down to 39000 points (or even 36000 points in extreme political circumstances) as this column’s Aug 1 piece cautioned.
First, uncertainty stemming from domestic politics has only worsened with the PML-N adopting a painfully obvious confrontational strategy.
Second, the uncertainty over the future of PML-N itself; political observers say that PML-N is heading towards uncharted territory and no one knows for sure how the party would look like without Nawaz or his wife and daughter as top party leaders or holders of top political office. Nawaz has been dismissed; his wife has risks of throat cancer whereas his daughter faces NAB.
Third, the impact of the most recent Afghan strategy change announced by US President Donald Trump is “uncertain” for Pakistan’s economy in its most optimistic reading (and ergo the market). A realistic assessment would label it “negative” since a sharp statement by a sitting US president affects businesses, travel advisories, and otherwise dampens sentiments of those exploring the prospects of trade and investment with Pakistan, including its good old saviors of last resort: the IMF and the World Bank. (See: To Uncle Sam: Stop digging!)
Yet, the market’s sharp rebound yesterday seems to ignore all these uncertainties. Perhaps it was just a technical rebound or short covering at lower levels. Or perhaps, what is needed instead is the presence of two equally aggressive-looking bull and bear statues smack in front of the PSX building, as a gentle reminder to those suffering from bullish bias that bears also exist.