After some happy tidings the week before the ongoing one, when bulls were all over the place taking the KSE-100 benchmark past the 12,000 barrier, the last few days have not been similarly buoyant. First, selling motivated by profit-taking pushed the market down in successive sessions, though not in a big way. And then Wednesday on the heels of the news that the Hubco shares had been dumped on a massive scale by the Saudi investors (the withdrawal was huge, to the tune of $455 million) deflated the market, making it plunge by some 300 points before recovering to close at 234 points down.
This sharp downward spiral cancelled the gains that had looked so handsome this time round last week. Worse, rumours abounded that more of the same was in store, with some pundits claiming that in the days to come the market might lose around 2,000 owing to the pressure of the Saudi pullout from Hubco and its psychological fallout.
For an Average Joe Investor, this must be depressing news, for owing to limited resources he is more vulnerable to decline in value. But for such a financially modest person, this scribe’s stock broker, MND brings an optimistic analysis. He believes that this Saudi pullout will not be a harbinger of decline. His thesis: just as a cut in the interest rate provides boost to the market only for a day or two, such negative news would also impact it for one or two sessions only. And unless bad reports persist, MND forecasts, the bears should have vacated the market by the start of next week.
Even otherwise those who had invested in solid corporate entities will not suffer in the long term if they sit out the storm without panicking, retaining their investment and meanwhile enjoying the dividend.
Meanwhile, MND thinks that if one had liquid cash one should go on a buying binge to take advantage of the low rates. And he presents a slew of cheaper side options from the December-closing shares that could pay a good return in about three month’s time.
Off the cuff, he cited Bank Al-Habib (in the just released financial report, its earning per share up from Rs2.50 last year to Rs3.30), Habib Bank Limited (just announced Rs3, or 30 per cent, interim dividend per share for the third quarter) and the two Fauji Fertiliser companies (both of which are not likely to be impacted by the impending winter curse of gas load-shedding owing to obtaining iron-clad contractual agreements with the state suppliers at the time of installation), while Allied Bank Limited too looks a good bet. What is important to note is, good times or bad, avoid getting into speculative investment, howsoever tempting the tip. Some weeks ago when Fatima Fertiliser Company was trading at under Rs15, yours truly was advised to invest in it by a market guru who is fast on the uptake and mostly ahead of the game in accurately reading the vibes. One was told that the scrip would a couple of months down the road be trading in the Rs22 and Rs25 band – or even better.
At that point, I was looking for lower-end value shares that offered dividend or capital gain in quick time. And I remember mentioning in this space why I hadn’t gone for this particular buy – despite the fact that I trusted the tip to be accurate. And it has turned out to be true, and Wednesday when the companies in the red overwhelmed the ones in the green zone, Fatima Fertiliser was still up – and trading at Rs24.50 apiece. Had I gone for it, I would have made more than 75 per cent in capital gain (around Rs175,000 for an investment of Rs100,000) in under two months, yet there isn’t the slightest tinge of regret. This would have been speculation, for the company was not in the black then or perhaps isn’t even now, and it has never paid dividend in its short history.
While the adage nothing ventured, nothing gained may be true, for an Average Joe with limited resources, it’s much better to be safe than sorry.
The writer is Sports and Magazines Editor, Pakistan Today