By Gavin Bowring, Asean Confidential
It’s rare to hear of Pakistan as Asia’s best performing stock market. But over the last 6 months, the Karachi Stock Exchange is up 33.4% in local currency terms, far exceeding any other Asian market, while the Pakistani Rupee has appreciated 11% year-to-date. Pakistan also returned to the international bond markets for the first time in 7 years in April, selling US$2bn in five and 10-year sovereign debt, the latter yielding 8.25% and over-subscribed 14 times.
When Pakistan’s newly-elected prime minister Nawaz Sharif arrives in Islamabad this week he may take heart from the country’s surging stock prices.
But a reality check will quickly make him realise the tough task ahead in turning around an increasingly vulnerable economy. A country without regular electricity supplies can’t put too much faith in something as fickle as a stock market rally.
With a 17 per cent rally this year in the Pakistan stock market driven largely by hopes of a Nawaz Sharif election win, it might have seemed that his apparent victory was in already in the price.
But investors clearly believe there is still a little more juice the engine. The benchmark KSE 100 index rose 1.6 per cent to a record high in Monday trading, as many business people celebrated the former prime minister’s expected return to power.
Is Pakistan’s political transition in danger of succumbing to its economic woes? That’s a question increasingly making the rounds among the country’s businessmen as pro-democracy activists look towards the first-ever transfer of power from one civilian administration to another without at least some military involvement.
Almost two weeks have passed since prime minister Mir Hazar Khan Khoso took charge to oversee parliamentary elections due on May 11. While he has named a 14-member cabinet, Khoso still does not have a finance minister.
With elections looming in Pakistan by summer 2013, prime minister Raja Pervez Ashraf has ordered officials from the ministry of petroleum and natural resources to make certain that there are no shortages of gas this winter.
Ashraf’s order follows some of the shortages of electricity earlier this year which prompted angry street protests. Any repeat of demonstrations over gas shortages as winter temperatures get near freezing in parts of Pakistan – as happened last year (pictured) – would hardly help the prospects of Ashraf’s ruling Pakistan People’s Party (PPP) returning to rule the country for another five years.