“Buy on rumour; sell on news”; that is the way most smart stock investors work the bourse. That is of course, unless the news flow delivers word of a landslide victory by the PML-N which is largely perceived to be a pro-business, pro-investment political party.
The Karachi Stock Exchange has been spiralling to new heights ever since the announcement of the 2013 General Elections in the country. The Election Commission of Pakistan (ECP) announced the election schedule on March 23. Since that announcement, the KSE-100 index has posted gains on all but seven days.
But even that positivity pales in comparison to the reaction shown by investors on the first day of trade at local bourses, after the announcement of election results. The benchmark index rallied more than 300 points, helping it shoot past the 20,000 points-level.
In an article published on May 9; BR Research had pointed out that the direction of trade witnessed during the first 10 days following elections is usually a harbinger of the general trend in coming weeks. If history is our guide; local equity prices can be expected to surge through coming months.
So why are investors so ecstatic? Talking to BR Research, Zafar Moti, a prominent stock broker and Director of KSE said; “PML-N has been known to be a pro-business, pro-investment party and its government will likely implement many reforms that are needed by the economy and advised by IMF”.
Chairman AHL, Arif Habib agrees with this view. Habib also highlights that the peaceful transition between democratically elected governments is an “unprecedented development”. He expressed hope that given its hefty mandate, the new government will find it easier to legislate than the previous coalition government.
The PML-N is well positioned to form government on its own, while only taking on board some independents and smaller parties. But market experts point out that the MQM holds a commanding mandate from the largest metropolis of the country.
“PML-N should bring in the MQM as a part of the Federal Government as that would give a lot of confidence to investors and businesses in the commercial hub, regarding government’s seriousness about ensuring smooth functioning of the economy,” the Chief Executive of AKD Securities, Farid Alam told BR Research.
There are unconfirmed reports of ongoing discussions towards this end between both parties. If a coalition between the largest party of the country and the representative party of Karachi does emerge; investors will be laughing all the way to the bank for weeks to come.