Equity markets bound to suffer as local, global risks abound

Pakistan’s equity markets face a myriad of problems in the coming fiscal year as it maneuvers political turmoil brewing at home, overall lack of interest from the world in emerging markets and macro imbalances on the external front, says .

Beginning with the latest turmoil on the political front, observers are skeptical whether the announced elections will ever be held on time. Despite numerous confirmations and announcements from the Election Commission of Pakistan and the care-taker Prime Minister Mr. Nasir-ul-Mulk, investors fear the worst for the coming elections.

“We expect export dispatches to remain over 400,000t during May,” Nabeel Khursheed, an analyst at Topline Securities said. “Higher exports from Lucky and ACPL's new cement lines in south region, which came online in December 2017 and January 2018, continue to support this growth as sea exports are expected to settle over 200,000t, up by more than 100 per cent YoY (in May).”

Following that, global investors have also been reluctant to pour in money into the risky markets as yields rise in the US. Leading global investors including Soros have cautioned a risky climate for the financial markets world at the moment. Investors from around the world fear a fall-out in the debt ridden emerging markets as US yields rise. The dollar denominated loans borrowed by the emerging markets during the low interest rate decade are bound to face the music as their currencies weaken against the dollar.

Contrary to that, however, Pakistan has been the only country that has provided positive YTD returns of 1.1 percent in USD term. Global environment for emerging markets is also not conducive anymore, as amongst all the emerging markets only Vietnam reported positive inflows.

Taking stock of the above risks prevalent in Pakistan and the world, it seems that KSE-100 is on for a bumpy ride in the coming few months.

The word on the street suggests a dip in the market during coming few months, as these headwinds are bound to bring the index down by more than 2000 points.

Posted on: 2018-06-01T16:29:00+05:00