Financial markets can and do act a little dicey as budget time draws near, especially in times like the present, with the bourse locked in furious bull-run even as the real economy tears at the seams. There’s the expectation of benefits and patronage for sectors bidding up the market; the prospect of tax relief; the turn from technicals to market chatter, following matters related to subsidies, etc. And considering the market’s recent waltz past the psychological 14,000 mark, a number of interesting trends are emerging.
One, the cement sector has played handsomely in times of increased demand, both local and cross-border. Rapidly rising prices have not led to supply constraints or hoarding, or much uproar for that matter, which means the uptrend has some time before it plateaus. It is well positioned to cater to rising demand on both eastern and western borders.
The trade breakthrough with India is a windfall moment for the sector, even though final checks and balances need revisiting considering India’s unfair (and undocumented) concerns regarding tonnage etc at the crossing. And Afghan reconstruction is already gathering momentum. A win-win in both cases, which is why brokers have begun betraying expectations of tax relief in the budget. Take a hint!
Two, the banking sector has been an appreciated contributor to the uptrend, but it has remained below par, with ample upside potential. It’s collective star, and share value, is set to rise as sure, rare signs of foreign interest and investment begin gracing the sector. And with high return on offer in terms of dividends and bonuses, investment in banking scrips is not a bad call as the market moves beyond the 14k barrier and banking profits put the sector back in the limelight as a potential growth engine.
Three, with harvesting season underway, time has come to play the cyclical boom in fertiliser scrips, especially since they traded well below par all the while the market roared from one milestone to another. Despite its range-bound trading of the last month, at the heels of a lackluster showing at best over the market’s last four-and-a-half thousand points rise, fertiliser is positioned to do well all the way to the budget, at least.
Four, oil sector performance too has been below par, especially considering earnings in recent quarters. The sector takes cue from international price movements in black gold, where WTI crude has just generated a buy signal at $109/barrel, banking no doubt on improved numbers from America to generate additional summer demand. And as oil rises, local companies’ books will no doubt register profits, which must be reflected in the eventual market price. Oil too should do well in whatever remains of the outgoing fiscal.
Once again, it’s that time of the (financial) year when technical indicators are ignored in favour of market insight banking on well placed information flow (not that technicals are a good call at the KSE in the best of times). For the moment, it seems the chatter is tilting towards a highly bid market by the time Dr Sheikh presents the next budget. Stay long, stay happy.
The writer is Business Editor, Pakistan Today. Comments and querries: [email protected]
