- Foreign Portfolio Investment matters as well
One peculiar bit of history Pakistan made, or rather is set to make, this year was its equity market ending two consecutive years in negative for the first time since 2001. Seemingly that’s just a number – admittedly not the most encouraging one – but it also reflects the billions upon billions worth of investment that came Pakistan’s way only to end up in Money Heaven. The situation is made all the more painful because the year before this latest two-year rout, 2016, saw PSX as the region’s best preforming, prompting the MSCI upgrade to emerging market and expectations of much, much better returns ahead.
But then, sadly, PSX performed the worst in the world in 2017 and worst in Asia in 2018. And – it gets worse – none, at least not much, of this owed to marked factors. It was political overlap, when politics casts a shadow over financial markets and squeeses earnings. This means that the political drama that started with Panamagate and goes on as Pakistan flirts around an IMF program has hemorrhaged earnings out of corporate institutions for no fault of theirs. And, what’s more, the more the PTI government’s anti-corruption drive raises a storm, the more Foreign Portfolio Investment beelines to the exit gate.
On the one hand the ruling party makes a big deal of foreign investment yet, on the other, its short rule has seen uncertainty spike, which delivers the kiss of death to much of exogenous money. The stock market, whether or not an accurate barometer of the real economy, is a magnet for hot money if the conditions are right. Countries like Turkey turned their economies, as well as their standing in the world, around just by attracting investments from across the world. While Pakistan makes much noise about just such ambitions, sadly its policies leave a little bit to be desired. And as much as the prime minister denies the existence of an economic crisis, there must be some reason for all this blood on the market floor.