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Last week’s BR Research coverage on Pakistan’s stock market noted that while Baron Rothschild is famously known to have quipped that ‘the time to buy is when there is blood in the streets’, sometimes the time to buy is when blood has dried up. Or when the last drop of blood is let! The market action since suggests it is waiting for the blood to dry up if not waiting for the last drop to ooze out. (See Pakistan equities: precariously cheap, April 30, 2019)

With the benchmark Pakistan Stock Exchange hitting 35,605 (down 517 points), the market hit a new low since May 2016. The intraday low yesterday 35,570 has unnerved the most bullish of chartists who were expecting the market to find major support at 35,949 points. Yesterday’s market close below that level raised eyebrows. If the KSE-100 does not make a rebound recovery from current levels, then one can expect the index to slide towards 34,800 points.

For those who want to catch at the straws, the valuations are cheap, and that the slide in index in recent weeks has been marked by terribly poor volumes, which means the sell side momentum is not very strong. But the flipside is that with Ramadan around the corner (ergo shorter trading hours), volumes cannot be expected to pick up drastically to carry bullish momentum, if and when it surprisingly emerges around the bend.

For the now the road ahead seems quite uncertain thanks to continued ambiguity over IMF’s terms and conditions, FATF meeting in mid-May, and the budget FY20 in the following month – all are enough to cause break down. The point on IMF conditionalities deserves some deliberation.

Granted that unlike what Senator Raza Rabbani recently said, the new central bank governor has in fact resigned from the IMF. But with the kind of profile he has, he is likely to go back to the multilaterals (or other international career) whenever his term ends. This means that he can ill afford to not to respect IMF’s wishes; in other words, he can’t play Dar’s Bajwa. If exchange rate needs to be adjusted by a certain percent, the new SBP governor will have it done, and if the IMF thinks interest rates must rise by a few more basis points, then it will be done.

Little wonder that clouds of helplessness and despair hang over trading desks, no matter one talk to the buy side or the sell. Absence of clear plan of action, statements and actions by government officials isn’t helping either. And to create hype about a university focusing on Sufism and science at a time when there is very apparent lack of clarity and direction on far more pressing concerns, only makes a mockery of the wounds. (For detailed background to current market behaviour: see also BR Research Game of nerves: the plot thickens, January 21, 2019).

Copyright Business Recorder, 2019


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