Long way to go before Karachi shares recover

Islamabad: When stock prices ended down in their lowest volume in more than four years on Friday, driven mainly by a regional sell-off as well as political and economic uncertainty, many analysts were surprised.

This was a few days after share prices made their biggest gains in six years, following a decision by the Karachi Stock Exchange to ban short selling for a month and tighten the limits on how far shares could fall in a session. The KSE also announced a Rs30 billion stabilisation fund to try to stop prices sliding steeply.

These trends cap KSE's moment of glory. Pakistan was one of the best performing stock markets across Asia just last year, when the KSE's 100 index rose 40 per cent.

In the past, the KSE has remained a favourite for many equity investors.

But for the moment, it is difficult to imagine exactly how far the stock market can recover.

Since the new government came to power after elections in February, political infighting has continued. The main members of the ruling coalition are determined to disagree on a number of issues.

Consequently, for many investors, Pakistan does not present the promise of becoming a politically stable country unless the major parties set aside their differences.

So far, the parties which together form a majority in the federal parliament, have spent more time on issues which are inconsequential for Pakistan's mainstream population.

Tackling issues related to gaps in Pakistan's constitutional arrangements may be vital for the future of the broad macro-politics.

The writer is a journalist based in Pakistan.