Pakistan Stock Exchange rally losing momentum

Odds stacking against Pakistan that may reverse all the earlier gains

KARACHI:

If stock markets are leading indicators of what lies ahead, then the deteriorating sentiment in global markets signals that the worst may yet to come.

As the pandemic is rearing its head again across Europe and America, the prospect of a nationwide lockdown in the UK and parts of Europe has jolted global indices (Dow Jones -3.25%, FTSE100 -3.15%, Dax -4% and CAC -4.81%) on a weekly basis.

The second wave is surging even faster and stronger than the first wave in terms of the number of cases reported.

Central banks in developed markets are running out of ammunition to handle the crisis as real interest rates are slipping into negative territory and money-printing does not materialise without any consequences despite the arguments from proponents of some heterodox economic theories such as the Modern Monetary Theory.

Back at home, the State Bank has decided to keep the policy rate unchanged, as expected by market analysts.

Also, the contraction in economic activities, as indicated by falling imports, has put some clamp on inflation figures. The rally at the Pakistan Stock Exchange (PSX) is losing steam and showing signs of exhaustion as the KSE-100 index dipped 3.3% after hitting 42,866 points.

While many are still looking sceptically at our success in managing the first wave of the pandemic, the resurgence of the virus seems imminent.

Slowly, the odds are stacking against Pakistan with cold weather and low humidity, and pressure to open up the economy, which may easily reverse all the gains made earlier as the standard operating procedures (SOPs) are flouted widely.

The pandemic never left Pakistan, only the infection rate slowed down due to reasons still debated by the medical fraternity. Coronavirus came to Pakistan with a time lag and peaked two months later compared to Europe.

However, the government lowered its guard too soon just as cases started to taper off and the media diverted its focus to the rising political noise.

Since most of the cases are asymptomatic, the virus is spreading quietly while the general public is getting more and more complacent.

Also, the testing rates are falling because Pakistan was earlier ranked 130th in terms of the number of tests performed per million people during the peak of the pandemic but has now slipped to 152nd position as the government has shifted its resources to fight other myriad of issues.

Usually, governments in Pakistan work in firefighting mode and adopt the policy as and when needed but fighting the pandemic needs an unceasing and proactive approach.

It is clear that the world is not looking for a total lockdown option again similar to the one observed in Italy earlier but there are some things which are considered new normal until a vaccine is developed and dispensed to a majority of the population across the globe.

This new normal includes wearing mask in public, maintaining social distance and adopting personal hygiene measures, which should become a second nature by now.

If Pakistan has to avoid total lockdown in future, then it has to ramp up efforts to track and isolate the hotspots.

Renewing a sense of urgency among the masses is needed through the government and media to prepare communities for the resurgence in the pandemic before the situation spirals out of control.

The writer is a financial market enthusiast and attached to Pakistan’s stocks, commodities and emerging technology

 

Published in The Express Tribune, Septe0mber 28^th, 2020.

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