November 7, 2002	Thursday	Ramazan 1,1423

KARACHI, Nov 6: In the backdrop of the unfolding political drama, Pakistani stocks are taking a roller coaster ride, and even some of the best of stock picking gurus cannot tell which way would they head next.

On Wednesday morning, stock analysts were offering recommendations and predictions that ranged from: “We are not bearish on the stocks”, to “we would see some sideways movements in the coming days” to “sell everything at current levels”. And every analyst had his own reasons.

First the optimist: “Politics and PSO are the dictators” said Mohammed Sohail, head of research at InvestCap. He maintained that the trading pattern at the local bourses in the previous couple of days was a clear reflection of ups and downs on the political and PSO privatization fronts.

“We believe that this will continue to dictate equity values that have been leveraged substantially by weak holders to the tune of Rs8 billion as per the COT figures alone,” he said. InvestCap contended that the huge weak holdings would keep share prices volatile in the uncertain political scene.

Some correction might force weak holders to get out of the market and result in genuine buying from institutions sitting on excess liquidity. “Equities still offer a decent dividend yield of 11-12 per cent and we don’t see market crashing down”, Sohail at InvestCap said.

But others were less enthusiastic. In his morning report of Wednesday, Arshad Arif head of research at KASB & Co observed that cash liquidity simply was the key reason behind the consistent positive movement of the KSE 100 index. He stated that in spite of the possible negative impacts from the fragile political situation, market direction was north (at least until Tuesday).

“We are of the opinion that generally high cash liquidity results in such irrational behaviours in the stock market,” Arshad said, and added: “However, will this irrationalism continue in the future? We do not think so.”

Analyst at KASB explained why they were negative on the market, saying that irrationalism could not continue indefinitely and would have to end, for “after all investors are also human beings.” They said that the uncertain political environment would have its impact over the economic performance. And the market forces would discount that eventually. KASB analyst said that they were not assigning any downside potential to the market owing to ineffectiveness of the index in the present day.

“However, we firmly believe that the pre-election levels should be kept in mind as near term floor,” KASB wrote, adding, “SELL everything at current levels.”

Analysts at brokerage, Taurus Securities, looked to be cautiously pessimistic. “We believe that the political uncertainty will affect the market to some extent, and we could see some sideways movement in the coming days until the situation is clear,” said Taurus. These analysts cautioned investors and traders to “sell on strength”.