Equity market braces for shocks as “politics of noise” haunts economy

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Political upheaval is driving sentiments on the country’s stocks market where the risk-averse investors on Monday offloaded their shares in panic on the back of political uncertainty ahead of Pakistan Tehreek-i-Insaf’s (PTI) call for so-called “Azadi March” slated for August 14 to protest alleged rigging of May 2013 general elections.

The stocks observers dub the political agitation as “significant” given the hectic political meetings the country’s key political stakeholders have been holding to devise strategies for the Independence Day’s political showdown.

Having nosedived by 666.24 points on Monday, the benchmark index remained what equity analysts said range bound on Tuesday gaining 28.58 points to close “marginally positive” at 26,676.41 points.

“After opening on positive note market remained ranged bound,” viewed Topline analyst Samar Iqbal.

On Monday, the KSE 100-share index had tumbled by 2.20 per cent on the back of what Ahsan Mehanti of Arif Habib Corporation said “panic selling” the market witnessed on rising political uncertainty days before PTI’s march.

The investors, Samar said, were still confused on the developing local political situation.

This confusion led the country’s largest bourse seeing trading turnover and value setting in the red zones. The volumes contracted to 133 million shares from 224 million of Friday last week while the value of the 346 scrips traded slid to Rs 7.7 billion form Rs 9.4 billion of the previous trading session.

The market capital appreciated to Rs 7 trillion from Friday’s Rs 6.9 trillion. Of the total scrips traded 151 saw their value up, 165 down and 30 unchanged.

Askari Bank lost 09 paisas despite being the day’s volume leader having counted 16.7 million of its listed stakes traded.

“Stocks closed higher after CPI data for Jul’14 stood at 7.88pc YoY and strong earnings of OGDCL announced today depicting 37pc profit after tax,” viewed Mehanti.

The country’s largest listed firm with $11.7 billion market capital, the Oil and Gas Development Company posted profit of Rs 123.9 billion in FY14.

The earnings, the equity analysts believe, is masterly attributable to two per cent higher oil production and six per cent average depreciation in the rupee value. “Institutional interest in oversold stocks after foreign interest, improved DAP sales data for Jul’14 and speculations ahead of major announcements due this week played a catalyst role in bullish sentiments,” said Mehanti.

This, he said, was despite the investors’ concerns for “political noise” on the outcome of PTI’s march.

The country’s equity market has started feeling the heat as the PTI’s political summersault is approaching fast when the cricketer-turned-politician Imran Khan would be leading marchers to Islamabad where the protesters would be staging a sit-in until their demands are met.

“Amid these developments, we think that local bourse may remain under some pressure and a minor correction of 2-5 per cent cannot be ruled out,” viewed Topline analysts.

They said ever since PTI, the country’s third largest party, formally announced the long march, the local bourse has rallied 2 per cent or by 630 points since July 15.

The booming stocks market, the analysts said, seemed to have been ignoring the ongoing political noise thanks to net buying of $45 million the offshore investors made during the last nine trading sessions.

“Thus any slowdown in foreign buying amid recent sell-off in global markets may cause Pakistan equities correct itself,” they viewed. Any fall, the analysts believe, would provide opportunity to the cash rich local investors to buy.

“We reiterate our positive stance on Pakistan market trading at 2015E PE of 7.8x, still cheaper than regional frontier markets,” said they.

 

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