PSX’s year of fear

When they are not playing Ludo, they are killing flies. What else there is to do at the Pakistan Stock Exchange these days. Trading volumes of top-100 firms tracked by the benchmark index have dropped to an average 59 million in the month to-date. This is down from an average of 73 million, 75 million and 92 million in the preceding three months.

With the SECP probing the ‘leaked data’ allegations in the weeks ahead, some of brokers in question will probably soon find that playing Ludo is a luxury they cannot afford anymore, although the implications of the probe might result in weaker sentiments across the board, which in turn might allow people to play more Ludo. Somebody should buy Ludo stocks! (Attn SECP: this is not a real call to buy).

Anyway, SECP’s probe is the least of problems at the moment. PSX’s year of fear began in late May 2017 when the benchmark index started slipping from its record high of 52000 plus. It should have begun a month earlier when the Supreme Court ordered an investigation against the now defunct Prime Minister. Now the plot has only thickened! (See also BR Research column: ‘KSE100: Drama on two-way street’, November 3, 2017 & ‘No surprises at the PSX', November 20, 2017)

In Islamabad, Lahore and Karachi worries abound. The state’s abject failure earlier this week raises questions, the answers to which would be surely unpleasant. One of these questions surrounds the theme of civil-military relations. (See BR Research column: 'A Faustian bargain', published 29 November, 2017).

Other concerns revolve around the elections: whether they would be held on schedule; before schedule; a year after schedule; or even no elections for an indefinite period with a puppet called national government.

That’s reminiscence of the 90s in many ways. Scary!

Turn the uniocular at the economic horizon instead. But there is still no reason to get excited except perhaps the raising of foreign bonds for buttressing the reserves. Anything else? Not really! Then what explained the rising bottoms in recent trade. On October 13, the benchmark index hit an intraday low of 39,482 points; followed by 39,556 points on October 31 and 39,564 points on November 28.

Proverbs lose their kick when translated, but to use a loosely translated Urdu saying, the index’s refusal to fall further towards 36,000 points is a classic example of how a drowning man holds on to a piece of hay. That hay in this case is so-called ‘attractive valuations’ in the rough sea of uncertainties, which is in fact what marketmen are trading these days with each other: uncertainties.

Amid all this at least one thing is certain: those with still ‘bullish outlook’ have galls of steel. Kudos to them if they turn out to be right! Although, with a new intraday low posted yesterday, that outlook seems less likely.