Even the greatest pundit in the world cannot predict accurate trend in the stock market. The seasoned and the savvy investors go broke at times since experience does not work and the life time spent in this business does not give expertise as well. Here comes the adage ‘buy at lows and sell at highs’. This may provide a certain level of solace to those who do not lose the nerve.
Pakistan Stock Exchange offered a whopping return of 44 percent on the investment to the brokers as well as the investors in 2016. This was considered one of the best years in the history of the benchmark KSE-100 Index of the Pakistan Stock Exchange since investors made fortunes during that year. There was a wide spread speculation at the end of 2016 that the Index may touch 62,000 points in 2017. This speculation was given further credence by the performance of the market in May 2017 when bingo KSE-100 Index closed at 52,869 points, the highest ever level, on May 25, 2017. Well, from that time onwards during the entire 2017 and 2018, the market has been waiting for the so-called triggers to move northward. 2017 brought bad news for the investors at the end of the year by closing at 40,471 points with a negative return of 15.3 percent. The story did not end in 2017 since the negative trend seeped into 2018.
The year 2018 did not prove positive for the investors as well since the closing at 40,471 points with a negative return in 2017 continued its momentum dragging the market down to close at around 38,000 points with a negative return in 2018 as well. Looking at the current levels, the experts presume that the Index is down 17 percent in dollar terms, representing its worst performance since the 2008 crisis when market was frozen for around 110 days.
At the end of 2017 with the dismal performance, some believed that KSE-100 Index might close at 47,000 points in 2018. This prediction has proved wrong by wide margin since the market plunged to even below 38,000 points during the last trading sessions of the market. Prior to the decision of the market’s relocation to MSCI’s emerging-market index from the frontier-market category, almost everyone was upbeat and there were prediction of millions of dollars of investment in the bourse. However, at present the perception is contrary to what was observed at the time of the decision.
There is a perception in certain quarters that political uncertainty over the period of last two years has taken its toll on the performance of the market and there is every reason to believe that the market would rebound in 2019 since good news are in the offing. The whopping amount worth $6 billion from Saudi Arabia in terms of deposit in the central bank and the deferred oil payment along with the news of $3 billion from the UAE coupled with the news pouring in regarding the Chinese help would prove vital in the days to come. The soft tone by the USA recently regarding the peace talks with the Taliban as well as the progress made in the CPEC projects might provide the triggers needed by the market.
The demands of the market need to be satiated since the budget 2017-18 is widely believed to be one of the culprits for the chaos in the market which burdened equity investment with new taxes. The budget 2018-19 was no different as well with some exceptions. The incumbent Finance Minister would have to take the decisions deemed friendly by the investors. Along with the political development, the successful negotiation with the International Monetary Fund in a month or so may help the market rebound.
Increase in the discount rate, further devaluation of the local currency, decrease in the oil prices as predicted to be in the range of $55 to $65 per barrel during 2019, surge in exports, substantial foreign exchange reserves and overall economic performance would impact the performance of the market in the next couple of months.
Prudent regulation along with the transparency were always keys to the bourse.