I am amazed to note that none of the brokerage house is talking
about this likely fall, seems they have been told explicitly by the high-ups in
the government to remain silent. The government, particularly the finance
minister is using the rising index as an indicator of the robust performance of
the economy of the country.
I am sure many of the readers may not like my expression, “In
no way the benchmark index of the Exchange is the true indicators of the robustness
of the economy of Pakistan”.
My premise is based on the following: 1) the index is based
on 100 out of total listed around 550 companies, 2) bulk of the index points
pertain to around 30 blue of the blue chip companies, 3) substantial holding is
by institutions and foreigners, and 4) bulk of the daily trading volume is
generated by “Day Traders”.
Coming back to likely substantial fall in index, the readers
are advised to keep following points in mind and watch market movement closely:
1) income of commercial banks will decline due to the reduction in interest
rate and shrinking appetite of the private sector borrowers as well as consumer
financing, particularly car financing, 2) E&P companies are likely to
witness fall in earnings because of declining crude oil prices and mounting
circular debt of the energy sector, 3) the ongoing IPP saga may also result in
selling of these shares as well as reduction in income, and 4) profitability of
fertilizer companies is being marred by persistent hike in gas tariff.
Going two steps forward, I believe bearish spell in the
United States, may lead to a situation we have witnessed in 2008. At that time
the fall was led by subprime loans and this time it will be led by technology
companies.
