Analysts sceptical PSX will sustain uptrend

Market has recovered in the last two sessions after losing over 8,000 points in about one month

KARACHI: The volatile Pakistan Stock Exchange's (PSX) benchmark KSE 100-share Index finally bounced back in the last two sessions, gaining close to 3.2%. But this run comes after the index shed over 15% and hit a seven-month low below 45,000 points on Tuesday.

Pundits, however, are sceptical whether the market will sustain the uptrend in the short run.



While upcoming events suggested a return of the bearish trend, experts said it was difficult to anticipate the bottom level of the benchmark index.

Elixir Securities said in a note to its clients "with the JIT (Joint Investigation Team) probe expected to be concluded by July 10, we expect the market to remain under pressure while volatile foreign flows may set the tone for index movement during the period."

Arif Habib Limited (AHL) said: "Investors are expected to remain wary post-Eid holidays and the two-day trading week will also be the rollover week adding pressure to the market."

The two brokerage houses, however, added that given the recent correction in major stocks, value-hunters were likely to start cherry-picking after the Eid break.

Political uncertainty because of the JIT proceedings will keep the movement of the local bourse restricted. However, a further correction would provide investors another window of opportunity to amass value stocks, they added.

AHL Head of Research Shahbaz Ashraf said "it is hard to predict the bottom. We are advising investors to make value-buying (at current levels) instead of guessing the bottom."

History suggests investors had many a time missed the opportunity of value-buying while waiting for a possible bottom, Ashraf added.

The benchmark index hit an intra-day all-time high of 53,127.24 points on May 25, 2017.

Since then, it has experienced massive selling because of an unfriendly budget for 2017-18, post-MSCI upgrading correction amid continued foreign selling, political uncertainty over JIT's graft probe against the Sharif family and above all panic selling.

The market dropped 15.45%, or 8,212.8 points, and closed at 44,914.44 points on June 20 since the intra-day high.

The analyst added the dip came after banks and companies shed their holdings to adjust their investments in the market.

"Banks and companies are not allowed to invest over 50% of their provident funds in the stock market. They are rationalising their portfolios ahead of the submission of their June closing reports to the State Bank of Pakistan," he said.

Similarly, mutual funds were divesting their portfolio in order to distribute dividends among unit-holders at the end of fiscal year on June 30.

Besides, there were reports that the unit-holders had given redemption calls to their respective mutual funds. This added pressure on the stock market in recent times, he said.



The analyst said active foreign funds also did not stage a comeback against expectations as they were concerned about likely depreciation of the rupee against the dollar in the near future.

"These and a couple of other factors, including the JIT probe, have invited panic selling," he said.

Published in The Express Tribune, June 24^th, 2017.

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