Bearish bourse

There is a huge amount of confusion, especially on whether we are going to the IMF

Editorial April 12, 2019

Nothing impacts the bourse negatively as much as confusion about the government’s economic policies does. And there is a huge amount of such confusion, especially on whether we are going to the IMF; and if yes, on what terms.

To add to that are the disturbing forecasts on key economic indicators made by global financial institutions like the IMF, the World Bank, the Asian Development Bank and the UN’s Economic and Social Commission for Asia and Pacific. None of these institutions has had encouraging words to say about the financial health of the country.

All of them are warning of a persistent fall in the economic growth rate over a couple of fiscal years to come. That Pakistan is even predicted to lag behind the South Asian minnows like Nepal and the Maldives in terms of economic growth rate is enough a bad news for investors to stay away from the bourse. The depleting foreign currency reserves are also worrisome in the context of investor confidence. With economy not doing well, political uncertainty is sure to creep in, which too helps bears to prevail.

So with much going wrong on the economic front, especially since the PTI came into power in August last year, no wonder the stock market was bound to suffer. On Wednesday, the benchmark KSE-100 Index shed 550 points, stooping to a 33-month low of 36,579 points.

The index did recover 208 points on Thursday, but it is far from encouraging. It was on May 25, 2017 that the index had hit its peak of 53,124 points, but ever since, it has plummeted by 16,545 points, or 31 per cent, wiping off almost a third of the investors’ savings. The market capitalisation of the Pakistan Stock Exchange has eroded by a staggering Rs3 trillion — from Rs10.5 trillion to Rs7.5 trillion in the same time period.

Even if the stock market is not a true barometer of the state of the economy in view of its manipulative vulnerabilities, it does serve as some kind of a report card on the government’s economic performance. All eyes on Asad Umar!

Published in The Express Tribune, April 12th, 2019.

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