- A thought for the emerging market
The government’s decision to close furnace oil based power plants did not do the PSX any favours last week, but of late politics more than business has cast a dark cloud over Mr Market. With no more corporate earnings or announcements due till next quarter – and the last one not disappointing in terms of inviting investment, especially the cherished foreign type – a healthy, steady ride was expected for our new ‘emerging market’. But just then the fortunes of Nawaz Sharif and Ishaq Dar – especially ‘breaking news’ about whether or not they would attend court, follow their cases, etc – put a brick wall right in front of it.
Considering the following rout from the point of view of foreign investors in financial hubs like London, Hong Kong and Dubai, the hot money beehive for the exit door is not hard to understand. They parked their money in his new emerging market – region’s best performing for last year? – after due diligence and vetting books of listed companies, with the hope of good returns, at least. That political events, that too concerning an ousted prime minister’s alleged corruption, pulled the rug from under the market so easily means investments here are just not safe.
Now, with the Islamabad protest so badly handled, more bad political news will send yet more shockwaves through financial markets. Not everybody important in Islamabad has time to notice – considering how they are busy revolving around the former PM – but we already do poorly in terms of earnings and the government functions, primarily, on debt. It wasn’t bad enough that it could not breathe life into the real economy. Now its actions are also compromising foreign investment in the capital market, eroding years of steady progress. The only way of handling the overlap between politics and markets, eventually, is bringing more maturity into politics.