Business | Markets
Equities to pose a major challenge for new president
Pakistan's equity markets will open tomorrow, taking their cue from Saturday's presidential election which political pundits had already declared would go in favour of Asif Ali Zardari, co-chairman of the Pakistan People's Party (PPP).
- By Farhan Bokhari, Special to Gulf News
- Published: 23:28 September 6, 2008
Islamabad: Pakistan's equity markets will open tomorrow, taking their cue from Saturday's presidential election which political pundits had already declared would go in favour of Asif Ali Zardari, co-chairman of the Pakistan People's Party (PPP).
A big challenge for Pakistan's next head of state will indeed be that of overseeing the equity markets settle down while a new era marking the return of investors is ushered in.
To the extent that it can be assessed, unsettled equity markets which have been more than an occasional occurrence in recent weeks, can unravel political consolidation of any group or individual, no matter how solid.
That said, Zardari has much going for him. The PPP that he hails from is in the driving seat, having secured enough votes with the help of individual candidates and smaller ruling parties to form the government. This position of strength puts the PPP in a strong position to lead the ruling coalition.
Zardari has just recently seen personal tragedy when Benazir Bhutto, his wife of 20 years, was killed by an assassin's bullet in cold blood. Benazir's assassination forced Zardari to come in the limelight which is something that he had previously avoided.
His challenges on the economic front are far from easy. The list of economic woes is led by the fall of the Pakistani rupee which has lost almost 25 per cent against the US dollar since January this year in a major setback to the efforts of the government towards stabilising an increasingly troubled economy facing challenges including rising inflation and a significant fall in foreign currency reserves.
But the most difficult challenge for anyone in Zardari's situation may be that for Pakistan's business community, the nine year rule of former president Musharraf saw a period of higher economic growth and rising investments. To add to the feeling of prosperity was an unprecedented feeling that the privatisation programme had taken off. This was reinforced by a record high of $8.4 billion which came through foreign direct and equity investments as well as receipts from the privatisation programme during the financial year which ended in June 2007.
Artificial step
In sharp contrast, just last month, senior officials of the Karachi Stock Exchange took an unprecedented step when they froze the stock market's share prices after they dropped almost 36 per cent from their life-time high last April. Under the freeze, any share falling to the level of that particular day will have its trading automatically suspended.
It is clear that such a step was artificial by its very nature and something which is unusual in the history of Pakistan as well as the history of share prices. It is clear that faced with challenging economic fundamentals, the stock market continues to react in unfavourable ways.
There is no turning back for the stock market unless conditions down the line are supported by a real improvement in Pakistan's political prospects that have been at the centre of forcing down the share prices.
- The writer is a journalist based in Pakistan.
More from Markets
More from Business
Business Editor's choice
-
Saudi-Bahraini economic ties hit new high
Whilst press reports continue speculating on a possible new political structure defining ties between Saudi Arabia and Bahrain, facts on the ground confirm ever- stronger economic ties between the two neighbours
-
Cupid targets the Fed with early tweets
Declarations range from pure romance to cute overtures and racier fare
-
Do unemployment figures flatter to deceive?
Jobseekers and recruiters give out mixed signals ranging from optimism to downright despair even as official data show recovery
