The stock market has fallen to its lowest level for the past two years and the crisis is being viewed as a failure of the new government.
Is it their failure? and if so Why? Let me indulge a little further and show you why and how this meltdown of the stock market could have been avoided.
European markets have been falling and are at a 20 month low and Asian markets were bound to follow. This sell-off in international markets was fuelled by rising US interest rates and was quickened by the higher commodity prices; especially crude oil. The political uncertainties in leading economies further pushed these markets down and the mounting trade tensions between the USA and China has certainly helped in this fall. The recent row between the USA and Saudi Arabia over the murder of Jamal Kashoggi, in Istanbul, can further deepen and may ultimately lead to petrol prices being hiked.
The local economic conditions have been deteriorating for a while now, the rupee has hit an all time low against US dollar. Interest rates are on the rise; trade deficit has been growing and has put a huge pressure on the current account. According to Moody’s estimates it stands at 4.8% of our GDP. Our US dollar reserves are dwindling. The deadline for us to be labelled as a country which has no financial checks for terror financing (The Blacklist) is fast approaching. The conditional bailout package from the IMF is certainly on the cards and it will come defiantly with a lot of strings attached.
Let me admit that despite all the above knowledge available and like many others, I could not offload my portfolio. Even though I had been observing the foreigners, who have continuously been selling and off loading their positions at all levels, I could not sell. As a professional stockbroker, it wasn’t that I was shell shocked and could not see the obvious, the only difference was that I was with hope. Unfortunately the government gave me non and when it did came it was too late. Any government that reacts slowly in a crisis only deepen it and there comes a point when even a great positive step has no real gain. The delay in timely going for a bailout package has unnecessarily deepened the crises and what comes is too little and too late.
My country and its people are very robust; we can take a lot of beating but we need a beacon of hope and PM Imran Khan has to give us exactly that. If and when he gives us this confidence the market will pull back, irrespective of any conditions.
The writer is ex-president of Lahore Stock Exchange and ex-president of South Asian Federation of Exchange. asim@zafarstocks.com
