Can stock market fall be stopped?

Byline: Shabbir Kazmi

In the recent past, Pakistan stock market has plunged in an unprecedented manner. Some analysts say, 'it is reflection of the overall state of country's economy'. Others term it the outcome of geopolitical strangulations. Whatever may be reasons, policy makers have to find the solution and the top item on agenda should be 'overcoming confidence deficit'. Once faith of people in the incumbent government and Pakistan is established, other problems will be resolved in due course of time.

Ever since, Imran Khan became Prime Minister of Pakistan, expectations of people have been marred by wrong priorities, bad decisions and on top of all wasting time on non-issues rather than focusing on key issues and taking steps that could boost GDP growth rate. His biggest failure is 'inordinate delay' in concluding deal with International Monetary Fund (IMF). Around the world, entering into an IMF program is considered 'certificate of fitness of the economy of the country'. The IMF bailout package may be small, but paves way for disbursement of funds by other multilateral financial institutions. It is on record that the delay in finalizing the deal with IMF has also deferred flow of funds from other multilateral institutions.

Over the years, the opposition leaders in Pakistan have been holding IMF responsible for introduction of policies that penalize 'ordinary men' and Khan is not an exception. His uttering against IMF and other multilateral financial institutions has become the biggest stumbling block. However, he has not been able to swallow the bitter pill that living with IMF is like 'selecting the lesser evil'. First inflow of foreign exchange has to be ensured and only then other impediments i.e. budget and trade deficits could be addressed.

Pakistan stock market may be small in terms of size, but nearly 30 percent of free float is owned by 'foreign investors'. These investors are commonly called 'migratory birds' in search of 'safe havens'. It is on record that foreign exchange inflows into the equity market have kept the market robust. Ever since foreigners started selling, the benchmark index has been on downward trajectory. This demands a credible reply to a basic question, are the foreigners selling because economic fundamentals have deteriorated? Yes, it is the overwhelming perception that economic fundamentals have gone weaker, but not gone weird. Most of the listed companies are still posting good financial results and...