Speculators staked billions on Twenty20, SC verdict
By Dilawar Hussain
KARACHI, Sept 29: On the streets of Boulton Market and dark lanes of Kharadar, the odds were stacked against India in the Twenty20 cricket final. As majority of gamblers lost, they were understood to have been deprived of billions of rupees in aggregate. But those who placed 20 paisa on a rupee, convinced that the Supreme Court decision would come up in favour of a uniformed president, managed to retrieve some of those losses. Legally void, gamblers in Karachi and mainly in Lahore put their bets on just about everything. Bookies hedge their bets in Dubai and Mumbai.
Far be it to compare the speculators or investors in equities with the gamblers, but it has to be said that if the ‘uncertainty’ that plagued the market was regarding the judicial decision on the president’s clothes, the six-to-three favourable decision was just what bigger bulls were expecting. Several other incidents late last quarter and earlier this one had seen the stock values plunge by 15 per cent as the KSE-100 index after climbing to an all-time high of 14,202 points in mid-July, pulled back to its low of 11,955 points. But the events that led to that fall had left little room for guesswork. The dismissal of the Chief Justice; the bloodbath at the Lal Masjid; the Court’s hearing of the reinstatement of Chief Justice; possibility of declaration of state of emergency; activism of the black coats and the US sub-prime mortgage debacle were all unforeseen. And the market took the blow right under the chin.
But the capital market never looked worried and be thrown into turmoil, fearing that the judgement in case of president’s dual offices, could come otherwise. That was represented in the steady upswing of the index which recovered more than a thousand points to close on Friday on 13,355. No commotion was witnessed even the previous week too when the judgement was to be delivered as the KSE index gained 293 points during the week. What does that suggest? Did major players in the market and/or institutions knew something that others did not know and they continued to accumulate stocks at the lower levels?
Stockbrokers dismiss the idea as frivolous. “The KSE is too big now and can not be manipulated by a few players”, says a major market participant. He insists that fund managers who made the entry at lower levels have gained from their judicious judgements.
Jawad Haleem, analyst at Atlas Capital Market mentions that in the quarter ended on Sept 30, the KSE lost 3.1 per cent, which was its worst performance compared to corresponding quarters of the last six years. With the respective earnings multiple and dividend yield of KSE-100 at 14.1 times and 4.0 per cent, the stocks now stand at a 19 per cent discount and 53 per cent premium to the average of the regional markets, making Pakistani bourse attractive for the daring.
The question, nonetheless, keeps raising its head. Could some of the larger brokers with a handful of deep pocket clients in collusion with financial institutions set the trend of the market on any particular day? Granted that the Pakistani capital market is now worth a hefty Rs4 trillion, translating into US$ 68 billion. But until the number of investors in equities remains as small as 200,000, given less than 50,000 accountholders in the Central Depository Company (CDC), the perception of deception by the few will remain.
