KARACHI, Sept 1: After three weeks of net losses which saw KSE-100 index plunging by 1,710 points--12 per cent--, the market this week recovered 161 points or 1.3 per cent. But almost all gains came in the first four sessions.

Investors who entered late Thursday or early Friday to reap rewards, learnt to their consternation that there is many a slip between the cup and the lip!

A ‘zero’ may be just that in absolute terms, but on Friday the market valued it at Rs45 billion. How? PML President Chaudhry Shujaat Hussain, contradicting BB on Thursday, said that only nine per cent and not 90 per cent of the issues of her party with President Musharraf had been resolved.

In doing so, the Chaudhry had just knocked out a ‘zero’, but investors in stocks took it to the heart and went about a selling spree which reduced 152 points from the KSE-100 index and a cool sum of Rs45 billion evaporated from market capitalisation.

The on-going political buffoonery is taking its toll on the market. The index is on a roller-coaster ride, powered by rumours and flow of ever changing news and views. “Uncertainty” is the key word. But Muzammil Aslam, economist at KASB Securities, points out that much of what is going on is either in the media or in the parliament.

“The country’s macro-economic story is intact,” he contends and refers to several indicators, including the GDP growth, which, he thinks, is likely to be around 6.8 per cent for the current fiscal year and domestic demand which remains strong.

But all bulls, including the economist, do not rule out a change of scene as political atmosphere heats up in the next two weeks.

Most market pundits subscribe to the view that whichever government comes into power, it would be difficult for it to steer away from chartered course in some major areas: deregulation; privatization; structural reforms; free media and independence of judiciary.

Merrill Lynch in its country overview of Aug 31 titled: “Deal or no deal, fundamentals intact,” concludes: “Political changes are not likely to derail economic progress. Key sectors are either deregulated or straightforward in terms of desired direction,” and the foreign investment manager observes: “No politician opposes reforms, and while delays are possible, we see no reason for change in direction.”

Encouraging words those and there is more: “Valuations indicate that risks might be priced in. The market is at 9.6 times 2008 expected earnings and opportunities are attractive in sectors, banks, energy, fertilisers, cement, textiles and telecoms.”Siddiq Dalal, a former director on the KSE board, said a smooth transition of power would re-invigorate investors’ confidence. He recommends leveraged buyers to remain sidelined and long-term investors to buy on dips.

“The fact that average daily volume of shares traded has plunged from 350 million in July to 197 million in August testifies that investors are somewhat confused and prefer remaining on the sidelines,” says director research and equity sales at a major stock brokerage firm.

For those who shudder at the thought of flight of foreigner, SCRA figures with SBP witnessed outflow of US$208 million since the beginning of the year.

Economist Muzammil thinks there is no reason to be hysterical. Compared to $2.56 billion of inflow last year ($650 million raised through UBL GDR; $731 million from OGDC GDR and $978 million of direct portfolio investment) the outflow looks minimal.

But for all that “uncertainty” and “suspense” is so thick in the air that it can be cut with a knife. Merrill Lynch suggests (to its clients): ‘Political uncertainty is dangerous, but not fatal. We urge investors stay long, and not hit the panic button just yet.” That clearly is just an advice. Every investor in equities has to make up his own mind either to take it or leave it.