Long term CPEC plan signed. Check. Zero load shedding. Check. Inflation in check. Check. Dollars successfully raised from bond market at good rates. Check. Interest rates continue to be low. Check. And the benchmark 100 index at the Pakistan Stock Exchange (PSX) at 17 month low. Check mate. Having flirted with new intraday lows in the recent days, and having touched the triple bottom thrice in a week – the index finally gave it up, and closed under 39000 for the first time since July 11, 2016.
Few saw it coming, most surprisingly did not. When the market cooled down from near 53000 in May 2016 – the market broadly shrugged it off as a ‘technical’ correction. When the now ex-PM was ousted by the apex court, they thought it is end of uncertainty, and the ‘valuations are attractive’ came into play. What has transpired since, is well documented and repeatedly commented on by this column.
Traders at the PSX these days have ample time to ponder upon what has hit them. They can still run some household chores and save time, for the volumes have dried up significantly. The KSE-100 index volume has gone down quarter after quarter in 2017, from 146 million in 1Q to 106 million in 2Q, 86 million in 3Q, and 67 million and falling in 4Q thus far. Still not convinced on how much have the volumes shrunk? Consider this. The volumes in 2017 are two-fifth of average volume of last 16 years, and that in 4Q2017 at one-third of the same period.
Is the market finally considering the end of the road for PML-N? That is what one active broker opines. One wonders what took so long for the market to realize the troubled waters PML-N finds itself in. Ironic that it took a sit-in threat by Tahir-ul-Qadri to get the realization hitting. Some put it down to the liquidity crunch in the market, which makes it difficult for investors to make timely exits.
If the political scenario is what has caused the fall from grace, expect it to only get worse. Political opponents of the incumbents are growing in numbers and confidence both. The court affairs are not ending anytime soon either, in fact more names are being added to the list. And then there is this proposal floated asking for market response on exceeding the daily circuit breaker limit from 5 percent to 15 percent. In absence of many positive triggers, this potentially looks a proposal for more bloodshed.
Rumour has it that the number of scrips eligible for margin financing may well be increased in the coming days. If that coincided with even a week’s silence on political front, expect more calls of ‘valuations are attractive’, and be ready to be doomed soon after.
From what it seems, the election anxiety seems to have crept in early this time, and elections are still some way off.
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