Thank God 2020 is behind us! Not that 2021 will necessarily be better, given the second wave of the pandemic and the growing risks that UK’s fast-spreading strain will make its presence felt soon. But at least, markets, governments and citizens are hopefully better prepared this year compared to the shock and awe of 2020. Short of an unexpected, uncontrollable, spiralling increase in Covid-19’s infection and fatality ratio, the market, therefore, should stay neutral to positive rather than neutral to negative in 2021.
There have been developments on the privatization front, where some of the key macros that stock market community generally obsesses about are also improved, even as their improvement don’t necessarily signal long term growth and development.
These macros include tamed inflation, stable currency, lower interest rates, rising remittances and better than expected exports. Another reason for the market to be excited is the construction package, and its extension thereof, whereas the likely delay in the rolling out of stringent sales and income tax measures under IMF’s nod should also bode well for the market.
By now it is abundantly clear, as has been flagged many times in this space earlier and as JS Global put it in its recent strategy report, that it’s not very clear if the situation is ‘Naya’ Pakistan or Deja-vu? “Whether we look at domestic politics or the country’s economy, the situation seems like flashbacks,” the brokerage’s report said.
Ergo, expect not any reform driven growth in the market, not in the foreseeable future. The growth will mainly be driven from the low base affect, and construction package spillover. And everyone knows how cyclical such growth is over the course of years. So, make hay while the sun still shines, but don’t get caught in the bubble of optimism.
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