Foreign pullout eases for a bit

The pattern in the last few sessions at Pakistan’s bourses, mainly at Karachi’s KSE-100 index, has been rather predictable. Up a few notches and then slightly down, or down quite sizably, but regaining as much a few days down the road. But amidst low volumes, the index has roughly lost by 700 points from its recent high of 12,000 – and it is not regaining it in a jiffy.
May be in another seven to eight weeks, it might get there again, but not unless there is a major development that provides the push and the momentum.
The good news meanwhile is that foreign funds’ pulling out investment seems to have eased off a bit – at least for the moment. Since that was one factor keeping the market depressed, even the temporary ceasing of this hemorrhage definitely is some relief.
The biggest recent recovery, after a sizable fall last week, came on two successive days after the weekend, on Monday and Tuesday – in the wake of President Asif Ali Zardari’s return back home from Dubai. The speculation on that count stopped, and the market perked up. The gain on Tuesday alone was a whopping 255 points, making the KSE page on the web under the title ‘Market Summary’ green almost all the way as one scrolled down.
But Wednesday again saw the market take a little tumble – by around 70 points. The motive of the investors so obviously was making a quick buck.
And this is a pattern that is likely to sustain, at least in the short term until mid-February 2012 and onwards – when the December-closing entities disburse dividend and bonus shares. In times like these, when the economy is stagnating at best, mid-February seems too far away for investors to come in droves and commence buying big time. So, with pocket books staying close till then, there would be little surges and minor dips, but the market would generally retain its present lacklustre mood.
For an Average Joe, what to buy and sell, for opportunities are always there? Mr Ali Malik, CEO of the First National Equities, is not just intuitive but very well informed too. He had some time ago marked Engro Corporation down as ‘Sell Now’ and predicted that it would fall steeply, to end up at two-digits. That when Engro’s star seemed to be shining bright and rising, being traded at Rs200-plus apiece. Despite a slight upward movement, and an upper lock the other day, it is being traded now at around Rs94.
If you go by Mr Malik, this is not the worst that you’ve heard of Engro. He forecasts that it could go down to even half its current price – which is already well below half of its peak.
Now that is some fall. I have never owned a bunch of Engro, so that is not going to hurt one. But going by that advice, and given that Mr Malik has mostly been spot on with his predictions, an Average Joe would do well to cut his losses here and now, before it becomes really expensive.
Mr Malik is not without a sense of humour either. And he believes that most Engro shareholders, especially of the Average Joe variety, are a sentimental lot. And even if they sold it, they’d buy back the moment there is the slightest hint of upward mobility. Apparently, he must have seen enough such Engro patrons to have formed such an opinion. But if I had a soft spot for Engro, I would take this comment as a word of caution and would never touch it unless I was absolutely sure that there was solid evidence that its management had overcome the snags and the figures supported such a judgment.
There are a few mouth-watering buys in cheap and middle range that one has discovered, but the word count is up, so until next Thursday.

The writer is Sports and Magazine Editor, Pakistan Today