Published On: Sat, May 13th, 2017

Panic seems to have been waned

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Editorial

Last week, the KSE made headlines by setting a record of high on the 100-index which is certainly good omen ahead of the annual budget. Experts say that markets, at times, are known to decouple from how the ‘real economy’ operates. Profitable opportunities are to be had both in the bull market territories as well as the bear market slumps. The key, however, is in getting the timing right in terms of buying and selling. Markets on the rise are predisposed into turning into a bubble. Thus intelligent investing is intrinsic to getting out before the bubble bursts, which it has to at some point. For what goes up must come down.

And in real economic terms – this means price correction. Pakistan has recently followed this rule of thumb prompting stocks to rise ahead of the annual budget. Late last week the KSE-100 index jumped to 49,851.3 points, as trading volumes surged to a high of 287 million shares. Commercial banks spearheaded the rally, trailed by chemical, cement, tech and textile companies.

The possible MSCI upgrading of Pakistan, from frontier to emerging market status, combined with some political ease has contributed towards positive investor sentiment. As the Panama dust has somewhat settled, analysts expect the market to carry forward this renewed momentum.

These bullish gains in equity markets come hot on the heels of the declining market that was on show in the first few days of this month, and may be explained by political uncertainty sparked by Panama Papers case which was at its peak during the same period.

The panic however, seems to have waned, courtesy of another positive development. Moody’s, the credit ratings agency, suggests positive growth dynamics for Pakistan given the completion of its three-year extended fund facility with the IMF, not to mention launching of CPEC. Indeed, the latter is widely believed to address Pakistan’s longstanding infrastructure bottlenecks and – given some stability on the political canvas – the markets will mostly likely maintain their bullish streak in the near future as well.

 

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