SINCE his election as president of the only superpower, Donald Trump has been awkwardly playing the ‘Don Quixote de la Mancha’ role. He has been swaggering his sword around. It has horrified not only his foes but also friends.

Threatening too many countries at the same time, the Republican president already finds himself on the wrong side of history. The man made proud proclamations that he later had to retract.

Economists, industrialists and analysts in Pakistan were thrown into panic after Trump announced travel ban on seven Muslim countries. Pakistan was not in the loop, but Trump hinted that the country was under the microscope.

“The danger, though averted for the time being, of a travel ban had the trappings of economic catastrophe, which would have translated in stock meltdown and loss of fortunes for investors,” said a veteran stock market player. But many others disputed or diluted that impact, albeit admitting that the negative economic repercussions could scarcely be totally ruled out.

Chief Commercial Officer at JS Global Khurram Schehzad stated that since US has so far been an important economic and trade partner of Pakistan, any implementation of the protectionist’s agenda by Trump in general and eco-sociopolitical decision for Pakistan in particular could lead to short-term impact on Pakistan economy.

Pakistan has been running a positive trade balance of $2.6bn with US which has also been a significant contributor of aid and a major contributor in terms of foreign investment — FDI and FPI from the US accounting to about 32pc on average in the last four years. Remittances from the US also are about 14pc of the total.

CEO of Insight Securities Zubair Ghulam Hussain said that a travel ban, if imposed, would hurt the biggest exporting sectors of the country: Textiles and IT. Out of the country’s aggregate exports of around $25bn, slightly more than a half constitute textile exports and 25pc of that, amounting roughly to $3bn, goes to US markets. “Travel advisory ban would prevent exporters to meet the buyers in US markets,” Zubair said.

IMPACT ON EQUITY MARKET: On Wall Street, all three major indexes — S&P 500, Dow Jones Industrial Average and Nasdaq Composite — are at record high on growing optimism that Trump would cut corporate taxes. Investors at the PSX were, however, unsure of the prospects. They thought that it all depended on how the Republicans decided to view Pakistan.

“Foreign investment in Pakistan’s capital market has been significant from the US-based funds and some of them are the world’s largest and have been holding big stakes in the top-15 Pakistan stocks (by market capitalisation) which is expected to be increased significantly once Pakistan is reclassified into the MSCI Emerging Markets category in May,” affirmed Schehzad.

He pointed out that the US share in portfolio investment has been over 55pc of the total FIPI. But there is a caveat. Since foreign institutional players’ investment decisions are driven on the basis of risk-reward, in case of any adverse decision by the Trump administration, there could be a very short-term impact on Pakistan equity market.

Investors’ decision is forever based on investment’s risk/reward rationale. For instance, some of the largest American institutional players do invest in Russia and even Iran.

“Since Pakistan offers double-digit earnings growth by the listed corporates with gradual policy-level reforms, the US companies and investors’ dash to the door on the wish of Trump administration, will not make much investment sense and can be ruled out,” said a fund manager.

Published in Dawn, February 19th, 2017