Dr. Hassnain Javed
October 28, 2018
Investing is always like watching paint dry or either grass grow. It is foolish to provide an exact answer to the time and number of market bottom or a market top. Many before and many after will always play in the market on hit and trial methodology. Some of the individual’s hits went wrong while on the flip side some were successful in their trails. But, it actually explains the science that there is no existence of exactness but there are somewhat chances to reach near it.
From the global perspective, the Russian market has started to go down and it provides the impression to investors that it is cheap and thus rapidly start investing in it. But, unfortunately it went down further. Investors thought it is a signal of a bearish trend and took it as an indication of being cheap. This series of trend continued until it became a pain in the neck and gave minor heart attacks to the participants, as it kept declining. This eventually led people to sell, and it ultimately caused the market to go decline further. Likewise, the Philippines market has also experienced a somewhat similar trend last month. The series and pattern was similar until the market dropped by 18 percent.
Besides this, focusing on our own markets and identifying and critically analyzing what are the good elements of the market is difficult to answer especially if you are institutional investors and sitting outside the periphery. There are a diverse range of answers to the above stated question. Indeed, the price of the stocks, or value of the index was never, and will never be a base indicator signalling when and where to invest in the market. In my view, this is least important variable to be taken when making the investing decisions in the foreign markets. In reality not even a single index is ever expensive or either cheap. If stock revenues are falling or either stock is being traded at half, market sentiments are somewhat blur or either overall market is suffering a downward dive, they can be some amongst the many reasons.
Today, I am not giving historical evidence or either numerical argument, but indeed providing a logical explanation that Pakistan’s stock market is operational beyond number the game and on facts rather than emotions. If we inspect closely on ground reasons of why the market goes up or drastically goes down, it will provides us with a better reason of how, what and why it happens.
In the recent times, most of the people from the Pakistani economy are not only of the view, but indeed closely associate political instability as the cause for the stock market crash. Now, if you really think this is the only reason that has caused the market to go down from 54,000 to 36,000, then one has to think again. Now, political instability is again one of the variables that could cause the market to get lower pace but if you say that it is the only factor then that is wrong.
In actuality, the accumulation of the weak economic situation, acts as an inflection point for the complete scenario. Whenever, there is political instability the stock market undergoes a bearish trend and provides a reason to buy more as the market goes down, and to wait till the market gets better. This is the global phenomena practiced but considerably not effective in our economy. Because, our market is continuously showing a downward trend. Every other day we wake up, our economy is served with news of a current account deficit, sometimes budget deficit or either deteriorating reserves with no positive or negative effects from emerging markets.
Besides this, our economy has declining exports, rising rates of imports and inflation, high amount of debt to repay and no significant implications for stock market in the budget. Indeed, it is stocked up with conditional IMF conditions and high fluctuations in the currency. Moreover, there are many oil companies with humongous percentage of market capitalization, who are trapped with circular debt. Moreover, the statements released by America are an additional threat which hurts our economic future.
Since the past many years, Pakistan’s economy is suffering from all of the above mentioned diseases, and up till now there is no medicine invented by our practitioners to permanently cure it. So far not even a single cause has shown a positive signal, indeed it is getting worse day by day. In such a scenario we cannot really say that Pakistan’s Stock Market is acting bullish or bearish. It might get some bounces from the market but cannot pick up a smooth pace until and unless there is concrete positive news about the market and not fake rumours.
In conclusion, Pakistan’s Stock Market can play a significant role in the local and international economy with economic, social and political stability. It requires a firm ground to play and win. Therefore, for sensible investors it is time to wait and watch carefully before they dive into the swimming pool.