Third time’s charm! When the benchmark Pakistan Stock Exchange hit a new intra-day low of 36,136 points last week (23-Apr), some players thought the index would surely slip further towards at least 35,000 points, if not the 32000-33000 range. But that was not to be! The market bounced back right after, only to slide back 104 points to close at 37026 points yesterday, after a marking an intraday high of 37,438 points.
On paper the prices are juicy. Very juicy! On average, Pakistan’s market is currently trading at a price to earning multiple of about 7.3 to 7.5 x depending on whose calculations you rely on. Yet buyers are not exactly swarming to the buy counter.
In the immediate term, much depends on news flow emerging from three fronts: (a) the result season where it the market would need a positive surprise to jump start buying engines; (b) macroeconomic indicators where improvements in trade gap may be overshadowed by poor FDI, higher inflation, poor fiscal numbers and the ensuing monetary policy direction; and (c) of course the IMF factor, where the mission has landed in Islamabad to finalise the bailout package, which in turn will come to dictate budget expectations as well.
Of these, the only thing the market may not be indecisive about is perhaps the corporate earnings. Because that should ideally have been modeled and incorporated in the price action by now. The rest – be it inflation numbers and monetary policy or IMF’s conditionalities – are worries big enough to create a demand shock for sleeping pills.
Baron Rothschild is famously known to have quipped that ‘the time to buy is when there is blood in the streets’. That’s what buyside players have been fashionably quoting over late night drinks (tea of course) lately. Then again, sometimes the time to buy is when blood has dried up. Or when the last drop of blood is let! (See also BR Research Game of nerves: the plot thickens, January 21, 2019).