Equity prices at Pakistan Stock Exchange have been depressing for a long time now. Last week was no different. Trading volume on Thursday hit its lowest since August 2012: less than 24 million shares were traded for top 100 firms. That's chip change for those who remember the 2004-2005 era. But why exactly is the market still caught in doldrums, now that IMF's staff note has been released which, as per earlier brokerage house reports, should have brought some clarity and direction to the market.

The short answer, as earlier discussed in this space, is that the market is still trying to interpret and understand the full range of consequences of IMF's structural benchmarks. This week central bank's monetary policy action and its policy note will be closely dissected for it may be a crystal ball for investors to prophesy about the economy's overall direction. (See BR Research's A crucial week for PSX equities, July 1, 2019, ‘Has KSE-100 found its bottom?' May 21, 2019 & ‘Stocks rebound: a helium-balloon?' May 27, 2019).

But let there be no doubt. Equity market troubles are more than about equities, interest rates or the new exchange rate regime. It's about the future of Pakistan's economy, since there is a growing realisation that same old same old of LTTF, timely refund payments, cheaper electricity won't suffice anymore.

The trading pits these days are not the same more; gone are the days of hectic phone calls to attend clients' orders. Long existential conversations over the state and future of economy have replaced talks of earning multiples, dividend yields, and attractive technical charts, at a time when the attack on benami accounts has also contributed to dwindling volumes at the bourse.

With the future of economy hinging on a few individuals who so far lack a deep pool of reform-minded technical experts, businesses and society equally are clouded with uncertainty. Will the Hafeez-Shabbar-Baqir formula work? What if it doesn't? What if someone leaves or is made to leave mid-way? How long will the pain of reform and uncertainty last?

These are the kind of questions that investors have begun to ask. Falling exports (June's number $1.7bn), energy tariff hikes, corporate slowdown (for e.g. automakers halting operations), and the much-feared fiscal shortfall seems to have become a footnote. Political wrangling isn't helping either. Which is why at the stock exchange, all bets are off these days, and existential angst has taken over. Don't be fooled by short term rallies.

Copyright Business Recorder, 2019