By Hammad Malik
Let’s hope the new year will be better
Not that a market collapse is something to celebrate, but surely I should be allowed a little pat on the back, at least, since my prediction of a PSX fall past 37,000 came true even faster than I expected. But the way the government’s so called anti-corruption drive — and the finance ministry’s inability to provide any sort of a roadmap – has spread uncertainty, it have come even sooner had there not be very strong support at 37,800.
So, in the absence of any positive or negative triggers, it simply bounced off that point for as long as it could. Until, that is, the news about the fake accounts and high profile names being placed on ECL reached investors. It doesn’t help matters, of course, that Sindh Bank and Summit Bank have come under serious fire. Add to that rumours that they were probably created just to rout black money for the gang behind the fake accounts and you get a better understanding of all the blood on the market floor.
Now the next strong support point is at 35,000 and, again, given the lack of positive triggers on the horizon, it’s most likely going to be a slow meltdown to that point. Let’s not forget that the monetary policy statement is due in January. Mr Market has already priced in another one percent hike (in line with IMF requirements?) so expectations, going forward, are of monetary tightening and contraction. Doesn’t sit too well with PTI’s promises of expansion and growth, does it?
Then there’s the mini budget that might or might not come out also in January. That, once again, is market-negative because it’s an admission of no clear policy plan. And, sure, there’s likely to be a breather whenever we sign with the Fund, but any rally will be short lived because the longer term austerity requirements of any program will depress the market, just like the real economy.
In such circumstances, aid from KSA, UAE and possibly China is immaterial. Funny how Darnomics, so discredited not so long ago, is finding favour with PTI ever since it became Asadnomics. That is so because so far, at least, there’s been no difference between the way Ishaq Dar and Asad Umer have run the finance ministry.
Unfortunately the foreign ministry, which can and should come to the aid of the finance ministry by forging partnerships and facilitating trade deals, is also without any direction and dynamism
Coming back to Friday’s collapse, since the politics of anti-corruption have cast such a long shadow on the market, it is going to be even more important to separate real news from noise from now on. So far the government has not been able to successfully deflect accusations that the accountability drive is very selective and targeted specifically towards the ruling party’s chief political opponents. And until it becomes a little more across-the-board, it will continue to rattle the markets the wrong way.
Unfortunately the foreign ministry, which can and should come to the aid of the finance ministry by forging partnerships and facilitating trade deals, is also without any direction and dynamism. The begging bowl diplomacy that led to the government praising itself because of positive bailout reactions from Saudi Arabia, UAE and China, is not going to count for much in the long run.
And it’s good that the foreign minister shuttled through four countries this week, but that was mostly about the Afghan endgame. No doubt an end to the war there will be good for everybody in the region and beyond, but there are no immediate quantifiable positives for Pakistan from the tour.
Instead the ministry’s time would be better spent reviving trade partnerships that traditionally brought valuable foreign exchange to the country. Pakistan has long lost its leverage over textile exports into the European Union, for example, which needs to be urgently revisited. True, there are a number of political hurdles to be overcome internally but it wouldn’t hurt getting the ball rolling on both fronts simultaneously.
Also, nobody’s given much thought to exploring the mainland American market, where once our carpets and other such products fetched high prices. These arrangements faltered as Pakistan experienced manufacturing bottlenecks at home and faced increasing political isolation from Washington. But now that the atmosphere is changing there should be an effort to revive trade instead of just concentrating on immediate bailouts on God-knows-what conditions.
So far Naya Pakistan has been a disappointment not just because the new government was unable to get a grip on the economic crisis, but rather because its own actions have exacerbated it. Perhaps the new year will bring better news.
The writer is a Lahore based market analyst and academic and can be reached at firstname.lastname@example.org.