Our stock market sometimes reacts in ways that are irrational, but then perhaps most markets behave in that manner once in a while. Even stock exchanges can only take that much strain and not more. The last week was mostly bullish, ditto for this week barring Monday’s rather steep fall of 105 points at the KSE-100, out of which 84 were regained Tuesday.
That, when the country’s major industrial and trading hub, and the venue of its main bourse, was brought to a standstill – this time by the weather gods, as record rain fell on the star-crossed city and rendered most roads as no-go areas with pools of water virtually turning them into knee-deep canals. In that backdrop the low volumes – especially on the first two days – was quite understandable.
One person whose opinion I personally value, Mr Ali Malik, the supremo at Lahore’s First National Equities, says that given the objective economic conditions this optimistic trend was quite surprising. “The overall sentiment was weak. The Karachi rains have played havoc for commuters in the city, making participation in trading difficult, even the networking at some points slowed down to the point of near inactivity. Yet the positive trends persist this is quite inexplicable”, said Mr Malik.
He did not discount the possibility of speculators keeping the market bullish, but one cogent reason that he could ascribe for the prevailing sentiment: some buyers investing in under-priced scrips, hoping that even if the market fell, buying at almost the rock bottom might yield profit in the best case scenario and not much of a loss in case of a reversal in drift.
That be as it may, being a most informed and perceptive investment advisor Mr Malik had a word of caution based on crucial information. Beware of the possibility of a downgrade in Pakistan’s rating by Standard & Poors. The calling-in of the sovereign guarantees by some of the IPPs due to non-payment of their dues might well lead to that extreme step. And in case that transpires, the market may receive a severe jolt. And this is something that could devastate the Average Joe Investor.
While Mr Malik advised watchfulness, the emphasis was not so much on hitting the exit route, but waiting, watching and being generally vigilant. One area however was a big no-no: investing in expensive shares. Based on that advice, one abandoned the intent to buy back the Millat Tractors Limited shares that one had divested a few weeks ago after its board of directors, contrary to its consistently excellent record, chose to dish out only a paltry dividend and no bonus. The MTL has lost around Rs220 since then, and seemed to be a good prospect.
There is some value in buying low-end shares though, and one has learnt that most investors – Average Joes being no exception – were switching from the mid-year closing shares to companies that close their accounts at the year’s end. Of these, fertilizer (its demand being far higher than the produce of all factories combined), banking (with some banks’ half-yearly reports termed as pretty good, while the third quarters reports are also thought to be on those lines) and life insurance were decent sectors to park your money in for the next five or six months.
In banking, so says my stock broker MND, Bank Al-Habib is a very good buy – as also mentioned in the last column. Having risen to above Rs29, this is likely to go up to the Rs37-40 bracket. Then of the slightly more expensive variety are Allied Bank and United Bank Limited, while Habib Bank Limited is of the 100-plus apiece.
In fertilizer, Fauji Fertilizer Bin Qasim has already gone up to Rs51 each, but could add value in terms of capital gain. In any case, it is likely to give a sizable dividend, on the news that its gas supply has been restored, Engro has gone up from Rs110 to Rs133 in quick time. Its previous high was at Rs200-plus. So there is a possibility here. In insurance, prefer life, and here EFU Life and General seem to be good investment.
One has not gone anywhere near the market for the last week and a half. So there’s nothing personal to report, other than steering clear of MTL. One is though itching to get back into the fray, so until next week.
The writer is Sports and Magazines Editor,
Pakistan Today
