KARACHI, Nov 28: The KSE-100 index plunged 154 points or 1.32 per cent on the first trading day this week, which some analysts thought was a clear sign of a sinking cycle. Yet, others were hoping for a rebound in December.

Analysts at brokerage AKD Securities observed that over the last 10 years, the KSE-100 Index had gained 0.73 per cent on average in the month of December. Keeping aside the year 2008 (post price floor), the KSE-100 on average had gained 4.83 per cent in the last month of the year. So could the incessant fall in equity values this year freeze in December?

“While the KSE trades at very attractive standalone valuations, represented by low price-to-earning (PER) multiple of 6.3 times and dividend yield of 8.6 times, the KSE discount to the region (on PER) stands at 42 per cent,” said the analysts, “price performance in December could remain subdued if foreign relations remain choppy.” Nevertheless, strong corporate profitability and already compressed valuations should provide some cushion on the downside while any sustainable improvement in global economic dynamics and/or OGDC-spurred rally may unleash latent re-rating potential at the KSE.

One of the worrisome factor for investors has been the outflow of foreign portfolio investment.

The foreign sell-off was comparatively heavier at $3.84million last week, up from net foreign sell of $1.3 million the week ago. On Monday again gross foreign sell at $5.37 million was much larger than the inflow of $3.65 million, resulting into net foreign sell of $1.72 million. But many market participants said that emerging and frontier markets were experiencing the same and the exit was as fast as the entry. Mumbai market which had seen an envious overseas investment in equities was looking at the outflow at the same pace.

Imtiaz Gadar, at KASB Securities in his report earlier contended that the year 2011 was likely to end as the “dullest year in KSE history.” Not because of the minus 3.2 per cent return, for the market has seen even more dismal return than that, but due to “frustrating range bound behaviour which limited opportunities for investors.”

AKD research calculated that up until the end of November, the KSE index had shed 3.1 per cent on relatively thin activity of average daily volume of 83 million shares and average daily turnover of Rs3.7 billion, despite resumption of monetary easing and strong corporate earnings.

Analysts said that the broad sell off in equities globally was surely a contributing factor, but the country’s own local and political issues had scared off investors. On Monday evening, some excited analysts were exchanging text on their cell phones about the US equity bounce back, with an initial upswing in Dow by 2.5 per cent and FTSE up 2.6 per cent.