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Islamabad: Pakistani stocks will take cue from the country's general election on Monday, which will likely settle the political and economic outlook and the question of President Pervez Musharraf's leadership.
In the past few months, investors have been wary of the political situation. But there hasn't been a slide in the country's stock markets of the kind witnessed elsewhere in the world.
Pundits from the Karachi stock exchange (KSE) often cite the fall in the value of the representative KSE-100 index as still being less pronounced than the extent of falls in global financial markets.
However, following the election there will be questions regarding the government's policy choices. Meeting that challenge will be far easier said than done.
Musharraf has often prided himself for overseeing an unprecedented success as far as Pakistan's portfolio investments are concerned. This essentially refers to the unprecedented flow of funds to the Karachi stock exchange in the past five years and the extent to which investors till even last year were keen on increasing their appetite for Karachi's shares.
Changing scenario
All that appears to be changing somewhat. The main challenge to be faced by Pakistan's equity investors comes from the future of Musharraf.
The president fought one political battle after another last year as he sought to assert his position as the main arbiter of Pakistan's future. In the process, Musharraf's reputation has been tarnished and his ability to oversee a new process of national unity has been jeopardised.
Musharraf can expect few good outcomes after the election. If the new parliament is dominated by politicians loyal to the president, it will immediately trigger allegations of rigging and fraud from already suspicious opposition leaders. On the other hand, if indeed the opposition parties stage a victory, Musharraf's ability to co-exist with them will be highly doubtful.
This means that with political disarray growing in Pakistan, the country's economic interests will suffer.
Reconciliation
Musharraf's continued domination of national politics will undermine the economy, including interests tied to the stock market. Once the election is out of the way and a new government has settled in to office, the challenge for a new prime minister will be to oversee a long overdue national reconciliation. Without such a reconciliation, protecting Pakistan's business and economic interests, including the stock market, will be next to impossible.
The confidence among equity investors over the new rulers of Pakistan will become quickly evident just days after the polls take place. There is bound to be instant reaction from the stock market by way of share price trends.
It is possible that the market will endorse the elections in the first wave of its reaction. But a second wave could well come in the not too distant future as stakeholders in the equity business take stock of exactly what has happened in Pakistan as the country goes through one of its most controversial political transitions with wide ranging ramifications.
- The writer is a journalist based in Pakistan.
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