Business | Markets
Artificial measures unlikely to stabilise equities
Pakistan's econ-omic outlook continues to haunt equity investors keen to invest in the Karachi stock market not too long ago.
- By Farhan Bokhari, Special to Gulf News
- Published: 00:02 September 14, 2008
Islamabad: Pakistan's econ-omic outlook continues to haunt equity investors keen to invest in the Karachi stock market not too long ago.
The mood remains bearish at a time when the Pakistani government has attempted to stifle the stock market with an artificial level declared as the 'floor', below which the market's representative KSE-100 index will not be allowed to drop.
Such artificial measures will just not work. The market has to be allowed to find its natural level and then take off from there if investors find it worth their while to return to Pakistani equities. At a time when Pakistan's political outlook may have settled down recently after the recent election of president Asif Ali Zardari, concerns linger on the econ-omic front.
The future must therefore be driven by the outlook for real life economic factors rather than artificial measures which kick in to place.
The point which must flow from this argument is indeed that there is a vital need to address the parameters which have pulled down Pakistan's economic performance.
These include a decline in overall economic growth, a rising international trade deficit, a worse than expected fiscal and current account deficit, and unfavourable growth in inflation which continues to nag the broad spectrum of the Pakistani economy.
In the immediate future, Pakistan is seeking support from important partners to withstand a growing balance of payments deficit.
Such prospective partners range from the government of Saudi Arabia from whom Pakistan is seeking deferred payments of crude oil shipments, to global institutions like the world bank and the Asian development bank.
Pakistan is also keen to get support from important bilateral donors, notably the US, which has supported Pakistan since the country joined the so-called war on terror.
The future of such efforts lies embedded in important political realities. It is difficult to imagine how the US would step in openly into the fray and provide generous emergency assistance while intensifying attacks on locations in Pakistan's border region alongside Afghanistan.
This is an area, which the US practically considers to be the home of Al Qaeda and the Taliban.
In the latest such attack on Friday, at least 12 people were killed who were probably believed by the US to be militant sympathisers.
In the immediate future however, equity investors need to benefit from a host of areas outside the stock market, not to liquidate their assets in stocks and shares, but simply to diversify.
Remaining in the stock market carries its own long term dividends. Some day, the stock market will indeed recover from its present state.
Those who are well prepared for that eventuality will stand to gain from a wave of rising benefits as share prices must rise rapidly to new heights.
Pakistan's stock market has shown a prospering trend in the past and there is no reason why there can not be a repeat performance going in to the future yet once again.
- The writer is a journalist based in Pakistan.
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