KSE100 Index witnessed a major fall since February 2009 again on account of political uncertainty. The heat of the situation can be observed through dull trading activity in the last week (low trading volume and 933pts drop in KSE100 index). However, major fall of 1300+pts during the first session of KSE today is creating huge panic amongst equity investors. In todays Value Seeker we discuss the historical market behavior post any major drop in the bourse. KSE100 lost record value since 2009 Most of the time equity market reacts more quickly on major news as compared to any other economic indicators reaction. This time equity market post a significant decline of ~1340pts (4.5%) during the first trading session. Rising temperature on political front is the major reason behind the phenomenal weakening and as a result investors are slashing their positions. Two parties have already announced the million march on August 14 2014 which is expected to drag down index further. Moreover, todays corps commander meeting in Rawalpindi is also fueling up the uncertainty in the local bourses. Post meeting announcement would play a pivotal role in setting up the direction of the market going forward. Outlook: Wait till political stability Although the economic indicators are showing a positive trend but political uncertainty is negatively impacting the market. We recommend investors wait and see strategy till the stabilization of the political situation. Local equities are now trading at a 2015E PE of ~7.9x and a 2016F PE of ~6.9x. Although, numbers like these have not been seen for quite some time in recent past and in fact, there are many stocks we feel have the potential to provide above-average return going forward but we recommend caution to investors until clarity on the political front. Source: InvestCap
Posted on: Mon, 11 Aug 2014 08:44:33 +0000
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