THE stock market is seeing one of the most protracted bear runs in recent memory. The last trading session on Aug 16 saw the benchmark KSE100 index drop to below 29,000 as it fell by 664 points in a single day. There was a time when such large drops would be big news, but recent months have seen falls of this magnitude so often that they barely register as significant events. At the moment, there is no panic selling considering that the lower locks are not being activated on a regular basis except for a few scrips. The sell-off is also broad-based with all sectors caught in the net. The latest bout of selling saw the oil and gas sector in the line of fire, while on other days, banks and insurance companies or automobiles have also led the way. What is happening on the trade floor is not, clearly, an unnatural event and cannot be said to be driven by speculative or manipulative trades. Rather, the stock market appears to be reflecting the overall downturn that is crippling the economy.

For this reason, the government must steel itself to resist all demands for intervention that may come from the community of brokers who are on the front line of the losses. Back in May, this same community managed to convince the government of the need for a Rs20bn bailout. At that time, the benchmark index had just dropped below the 40,000 level after having touched highs of close to 55,000 in 2017. The slide has been ongoing since May 2017, with no respite in sight, and it is likely as it continues that the temptation to yield to the brokers’ demands for government intervention will build. At a time when the government is trying to convey a message of sacrifice and austerity to the country, it will be very difficult to justify the need for a bailout for the stockbrokers. If the government’s message, that the economy has to undergo a period of painful adjustment in order to rectify its imbalances, is to be believed, then there is little to do except let the stock market find its own level in the new reality that is sweeping across Pakistan’s economy. There is no shortage these days of industry complaints, and if government support is to be used, then the priority should be for the real sector, particularly exports.

Published in Dawn, August 19th, 2019