PAKISTAN’S slumping stock market continues to test the resolve of investors. That the PSX upheld its unenviable position as one of the worst performing stock markets in the world during the first quarter of the present year to March should not come as a surprise to the investors, who should actually brace themselves for more losses in the weeks and months ahead. After all, the stock market is a barometer of not just the country’s economic situation. The investor sentiment encapsulates much more than that, and is a reflection of the political situation and economic conditions as well as underlying social currents. Little wonder then that the ongoing political strife between the coalition government and the opposition PTI over the timing of the next elections and the delay in the finalisation of the loan agreement with the IMF have had a negative impact on the bourse and investors.

Even though the benchmark KSE-100 index dropped just 1pc in the three-month period, the returns tumbled 21pc in dollar terms — the highest decline in three years after the index fell 33pc in the same period in 2020 — with the home currency falling 20pc against the American greenback. The average traded volume in cash and ready markets declined 25pc year-over-year and 21pc quarter-over-quarter to 173m shares a day during the period under review. That the market may remain in the company of other poor global performers for a longer period than investors would have wished for cannot be ruled out, considering the increasing political instability and economic uncertainty in the country. The possibility of social unrest can’t be brushed aside either, given the fact that inflation-stricken people are now ready to even risk their lives for free meals and ration. So, expecting a good return from the stock market in a country where an overwhelming majority of the population is struggling to put food on the table would be quite odd.

Published in Dawn, April 3rd, 2023