The first week after the imposition of emergency rule has clearly set the pace for nervousness across the Karachi stock exchange (KSE). While the market has recovered some of its losses in the first few days after the imposition of the emergency on November 3, prospective investors and analysts are clearly taking the cue from Pakistan's political turmoil.
For the moment, anxieties surrounding the future of the economy remain relatively subdued. This is largely because for now Pakistan's economic health remains insulated from the ongoing crisis.
While the KSE's representative KSE-100 index fell significantly in the past week - by a margin as large as just over 4.6 per cent on the first day of trading after the announcement of emergency rule - other key parameters remain largely intact.
Pakistan's liquid foreign currency reserves of about $16 billion, enough to cover about seven to eight months of imports, are holding for now. Other indicators that indicate a robust recovery from recent years include the overall economic growth rate and a sharp increase in imports and exports.
But most importantly for the stock market, emergency rule notwithstanding, many corporate sectors continue to post a decent rise in profits. Consequently, for some of Pakistan's largest companies and banks, political turbulence will not make a different to their profitability.
Some represent sectors such as banking, which have done extremely well in recent years, reaping fast growing profits on the back of an expanding economy.
Other sectors such as cement, steel and producers of items for construction have also done well, thanks to a construction boom across Pakistan.
For the moment, there are no signs of construction activity taking a hit in the midst of the political crisis in spite of a sharp fall in real estate values.
But given the mounting political instability, these factors continuing unchanged must be built upon a gigantic leap of faith.
In the coming few weeks, Pakistan's political temperature is bound to grow rapidly in spite of the economic fundamentals remaining intact. Is Pakistan's stock market and its economic direction then going to take the cue from political events? To that compelling question, the answer must be in the affirmative.
Vital issues
Two sets of issues are vital to resolve the political challenge before the future of the Pakistani economy gets protected and the stock market overcomes its nervousness.
On the one hand, it is vital to clearly get a sense on who will be in charge of Pakistan. This is a clearly pertinent question at a time when General Pervez Musharraf appears increasingly beleaguered and just too unable to come to grips with circumstances in Pakistan.
For too long, investors and analysts believed that the key to Pakistan's stability lay in Musharraf conclusively remaining the main arbiter of his country's future. Clearly, there are too many questions if that will remain so.
Sharing power
On the other hand, it is equally vital to get a sense of who will share power in Pakistan's future, with or without the general at the helm of affairs.
Benazir Bhutto, leader of the Pakistan people's party (PPP) is indeed the rising star. She has been more successful than any other political figure in making a major dent in the standing of Pakistan's present day rulers. Her decision to lead the charge of defiance against Musharraf has earned her kudos.
The PPP under Bhutto's previous two regimes favoured most of the same economy policy directions as those followed under Musharraf. Privatisation and reforms were the basic pillars of the economy under her regime.
A PPP victory in elections, which are expected to take place early next year, is hardly going to upset the stock market. For now, the market's future and stability will be determined not so much by who will rule Pakistan but how the country will emerge from the uncertainty of the past week as Musharraf tries to resurrect a country surrounded by fast mounting political questions.
