With about 3000 points lopped from the benchmark index of Pakistan Stock Exchange (PSX), red screens been dominating the trade over last month. But it’s not that time of the year (yet!) when red screens of the PSX’s trading board make it to prime-time news bulletin.

The factors responsible for market’s movement in the last four weeks are the same that have been looming since last year: “rising political heat ahead of general elections”, “anxiety over political and economic climate”, “anticipation of political noise” – to quote some leading local brokerage house reports.

Two new factors have also emerged: the Pakistan-US diplomatic spat, and feared reduction of Pakistan’s weight in MSCI EM index next week due to the inclusion of Chinese A-shares. Apparently, these factors have dampened sentiments so much that even the rise in global oil prices hasn’t lent a supporting hand.
The outlook isn’t exciting either. Brokerage BMA Capital expects “range bound activity” this week; Elixir Securities expects a “dull” market; whereas Arif Habib Securities also expects “range bound” this week “as there no key triggers”. AKD’s technical analyst Qasim Anwar wrote in his report last week that based on current data the worst-case scenario extends up to 40,169-39,160 levels.

This kind of market movement doesn’t come as a surprise. “The market is at a treacherous turn on the road. If investors act too fast, they might slip and fall into a valley. If they are too slow, someone else might take a lead. In this business, the loss of opportunity hurts as much as the actual loss,” wrote BR Research in a piece titled “What’s next for Pakistan’s stocks”, published on February 8, 2018. “As such nothing should stop the market from swerving further north. But there are signs on the road that read ‘SLOW’,” it added.

And the market did swerve north after February 2018. Between late February and early April, the benchmark PSX index rose about 3700 points. Soon after it had to screech in order to slow down; hence the 3000-point decline since the interim peak hit in early April.

If the PTI-PAT-PPP dharna in mid-January turned out damp squib, the life time ban on Nawaz Shariff, the fall of Khawaja Asif’s wicket, and the gradual flight of electables has spiced up the political climate. For those who see the glass half full, some of the worst expectations of the market haven’t materialized: fears of pre-mature end of the current regime are now dispelled, and that of late or no elections have eased (at least for now), whereas Shahbaz Shariff hasn’t been removed from office as yet.

For those who see the glass half empty, fears of Pakistan-US diplomatic row, the increase in aggressive stance against the judiciary and the NAB after the latter’s $4.9 billion mistake, the stand-off over interim set-ups, and growing external account risks in the wake of rising oil prices are enough to spoil the mood.
So long as this battle of perceptions isn’t decisive, the market will likely remain range bound. But here’s something most brokers and investors don’t consider too often: that it doesn’t always matter if the glass is half-full, or half-empty; what if it’s laced with cyanide, or with honey.