Equity investors will take cue from political trends

Islamabad: On Monday, Pakistan's equity investors will take a cue once again from the nation's emerging political trends as the country's elected politicians renew their attack to impeach Pre-sident Pervez Musharraf.

On Friday, the KSE-100 index on the Karachi Stock Exchange (KSE) closed up by just over 3 per cent, mainly because many investors took the view that the writing on the wall was a foregone conclusion.

On one hand, Musharraf's eventual departure has been taken for granted as he comes under a mounting political attack from his foes. On the other, some relief on the economic front by the recent fall in oil prices has helped reinforce a positive message.

For an economy which is heavily dependent on imported oil, Pakistan has recently braved unprecedented pressure as the government was forced to cut subsidies on different kinds of fuels while consumers were forced to accept a significant rise in oil prices. For companies, which run industrial plants that are driven by oil, this has been a significant hit. The stock market especially felt the pinch in cases of companies which are listed on the KSE.

Other related adverse developments have included cases of companies which were forced to raise the prices of end products. Consequently, in the midst of an economic slowdown, a drop in sales by such companies is indeed set to hit their financial performance. In the ultimate analysis, the mood surrounding Pakistan's economy and politics is bound to hit the mood surrounding equity related trends.

For many investors an added measure of discomfort has been the practical devaluation of the rupee. Indeed, in a moment of economic turbulence driven by political discord, it would be hard for global investors to seriously entertain the idea of expanding their presence in the Pakistani market.

- The writer is a journalist based in Pakistan.