Business | Markets
Weaker rupee could make investors panic
The fall of the Pakistani rupee last week to a six-year low will cause anxiety among investors in Pakistan's stock market.
- By Farhan Bokhari, Special to Gulf News
- Published: 00:45 February 10, 2008
Islamabad: The fall of the Pakistani rupee last week to a six-year low will cause anxiety among investors in Pakistan's stock market.
On Friday the Karachi stock exchange (KSE) closed its KSE-100 index after it shed some of its earlier gains, partially driven by concerns over the future of the rupee.
As Pakistan has undergone a significant economic recovery, the country's equity investors have reached out to the stock market in the hope of reaping significant returns.
Those returns have hinged in part on the stability of the rupee at a time when investors have been almost certain of the currency's exchange rate remaining broadly intact.
The pressure on the rupee has coincided with anxieties tied to the future of the Pakistani industry, especially as the world economy slows down.
Pakistani exporters in traditional areas such as textiles must find themselves pressed, driven by the fear of the effect of a global slowdown translating into a decline in the demand for goods such as textiles.
Global trends
For investors on the Karachi stock market, a decline in exports must not bode well for stocks of companies which are dependent on income from exports.
In spite of such a bleak outlook, other sectors, most notably banking and energy related companies are likely to do well.
Pakistani banks have undergone a recovery in the past eleven years since former prime minister Nawaz Sharif in 1997 first ordered banks in the public sector to be put through a major reform refort. As a result of that order, Pakistani banks today stand on top of a vastly improved outlook.
Energy related stocks also continue to do well at a time when global energy prices, most notably that of oil, are rapidly edging upwards.
This essentially means that Pakistani companies in energy related businesses have also benefited from global trends, as the cost of their produce has escalated sharply too.
However, the outlook for most of the other sectors listed on the Karachi stock exchange will suffer as their outlook becomes overshadowed by the oil related global shock.
- The writer is a journalist based in Pakistan.
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