Uncertainty clouds prospects of revival in Karachi shares

Islamabad: Pakistan's stock market has shown few signs of recovery from its losses from the previous weeks, coinciding with concerns over internal security conditions, some element of uncertainty surrounding politics and challenges surrounding the economy.

When the Karachi stock exchange (KSE) reopens on Monday, it is possible that it would take part of its cue from Friday's speech in parliament by Asif Ali Zardari, Pakistan's new president.

For leading equity investors in Pakistani shares, the underlying fundamentals of the economy as well as internal conditions remain disturbing.

Even in the midst of this otherwise bleak situation, the government is eager to say that there may still be sectors which are seen to be giving scope for promising returns on investments. For example, many investors still look upon oil and gas as an example of an area that continues to offer promise of increased returns.

In the past five years, profits of banks have risen significantly. Pakistani banks saw their return rise largely due to a sharp growth in foreign investment, which was reflected in the number of Pakistani banks that were bought out by overseas players over the past decade. It is clear that the trend has changed somewhat as prospective investors are visibly staying away from Pakistan, thanks to ongoing political trends.

Prospects

Other areas of prospective growth in the past included the automotive sector. However, the latest statistics speak of a substantial drop in production of new automobiles, which must mean a corresponding drop in profits. The moral behind these examples is simply to demonstrate that there is an acute need for investors to closely monitor the emerging trends surrounding Pakistan's economic and industrial outlook, with a view to making choices which are compatible with such trends.

For investors, two bits of advice are essential. On the one hand, they need to diversify their portfolios, dividing their investments with direct exposure to specific stocks with other areas where they are protected against sudden and unpredictable losses.

On the other hand, many investors are now exploring the option of taking their investments outside Pakistan with Dubai as the most likely destination.

However, investors must not embrace such an option at the cost of a sudden exit from the stock market, causing the danger of large losses with the possibility of a further crash on the stock market. Whatever the choices may be, investors must recognise that ultimately, the long term future of the stock market will depend on the happenings on Pakistan's political front.

- The writer is a journalist basedin Pakistan.