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Perception is stronger than reality. But between the Pakistan Peoples Party and the PML-Nawaz, the investor community has forever favoured the latter.

The fear of PPP policies struck in the hearts of the industrial and investor classes remains rooted since its founder, Zulfikar Ali Bhutto, released its first manifesto in 1970. Under the populist slogan of “Socialism is our economy,” Mr Bhutto vowed in the 1970 manifesto to nationalise all major industries.

He affirmed that under private ownership those were the sources of excess profits, inefficient production, wastage of resources and unhindered exploitation of workers. “Public sector will include not only large-scale production of gas, oil and coal but transport, railways, shipping and airways.”

In the party’s 1977 manifesto, the PPP recalled that 10 basic industries, including life insurance and banking, were nationalised on Jan 2, 1972. Although nationalisation has been rolled back slowly over the years, the damage was irreparable and so was the loss of confidence by the business and industrial classes in the party’s economic policies.

A split mandate remains a cause for market concern

But it was during the first Benazir Bhutto government that the doors of the stock market were thrown open to foreigners and fund managers in major international capital markets. They rushed in to lap up low-value and high-growth Pakistani stocks, enriching the broker community in the process.

Yet it did nothing to restore investor confidence in the party’s long-term economic policies.

A week earlier, PPP Chairman Bilawal Bhutto-Zardari released the party’s manifesto that pledged to “curtail hunger, rebuild the country’s economy and foster harmony between different institutions of the state”.

By contrast, industrial, business and investment classes have generally favoured the PML-N. It is because of the people’s perception that the party is more aware of the problems and needs of the economy since its leadership, the Sharif family, belongs to the business class. The perception is that their policies help improve corporate profitability, which reflects in the escalation of stock prices.

To be fair, the PML-N government in its first term came up to some expectations with regard to its business-friendly image. But history did not repeat itself when the party was again voted to power in 2013. The earliest disappointment was the anti-stock market budget. While setting all demands of the bourse aside, investors were saddled with the burden of more taxes. It was followed by the government’s inability to attract foreign fund managers to the Pakistan equities despite its status upgrade to the emerging market from the frontier market by MSCI.

That episode in May 2017 has since cast a pall of gloom over the country’s capital market, which posted a negative return of 10 per cent in 2017-18. It became the worst-performing emerging market from being the best-performing one a year earlier when it gave out a fabulous return of 44pc. The PML-N government under the stubborn Finance Minister Ishaq Dar did nothing to bail out the market. The regulators he appointed were more interested in framing rules and regulations than taking steps to improve the country’s ranking in the Ease of Doing Business Index, resulting in smaller profits and nil dividends.

On July 5, PML-N President Shehbaz Sharif unveiled the party’s manifesto for 2018. He did not dwell upon any economic and industrial issues, but highlighted the supposed end to loadshedding and the improvement in the security situation. Of the five major points in the latest manifesto, two seem to be dedicated to the economy: “Consolidating growth by expanding industrial base, capitalising on CPEC” and promoting regional trade.

But it is the new kid on the block that most polls suggest has to be watched. Five key points in the manifesto of Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) include economic uplift and eradication of corruption.

Of all the people who deal in high finance, stockbrokers are the first ones to sense the change in the direction of the wind. A big stockbroker would, until recently, go the extra mile to have Muttahida Qaumi Movement-London (MQM-L) supremo Altaf Hussain speak on the public address system at his spacious residence. But on July 5, he arranged a breakfast meeting of businessmen with Mr Khan on the lawn of the same house. The PTI chief said: “I am happy that Karachi’s business community is beginning to put its trust in the PTI, which was lacking up till now.” But his party has yet to unveil its economic policies and those relating to industries, savings and investment.

Muhammad Fawad Khan of BMA Capital Management observed that the stock market’s major concern was a split mandate and a coalition government as it may have a limited impact. So far, the stock market has not been able to repeat the past feat of strong returns seen during the previous interim setups.

“Politics should be viewed in the backdrop of likely unpopular policy framework with/without Pakistan’s expected entry in the IMF programme. To this end, selection of the finance minister remains crucial.”

Published in Dawn, The Business and Finance Weekly, July 9th, 2018