Sohail Shuja
Chief Minister (5k+ posts)
Pakistan's Stock Market Surge: Numbers Soaring, Real Economy Snoring
By: Sohail ShujaThe Pakistan Stock Exchange (PSX) is on a dizzying joyride, hitting record highs and crossing milestones that would make any investor cheer—or scratch their head. With the KSE-100 index soaring past 113,000 points, one would assume the economy is booming, factories are humming, exports are skyrocketing, and poverty is shrinking. But alas, the reality is far less flattering, like a glittering facade hiding crumbling walls.
The GDP Disconnect
If one judges Pakistan's economic health solely by the PSX's performance, it seems the country is basking in an economic golden age. Unfortunately, real indicators tell a different story. GDP growth, once a promising 6% when the market was around 43,000 points (in 2022), is now limping along below 4%. It begs the question: How is the stock market doubling its performance while the economy struggles to put on its boots?Large-Scale Manufacturing: Where's the Growth?
Let’s rewind to when the market hovered around 43,000 points. Back then, large-scale manufacturing (LSM) was enjoying double-digit growth percentages (around 10.4% in 2022), signaling robust industrial activity. Fast forward to today, and LSM growth appears as lifeless as a factory shut down by a power outage. In the first two quarters of 2024, the LSM was recording negative growth rate, while in the third quarter, it reported only a meagre 1.47% growth recovery. With stagnating industrial production, one would expect the market to reflect this reality, but instead, it’s partying like there’s no tomorrow.Exports: Missing in Action
A booming economy ought to produce goods that the world clamors for. Yet, Pakistan’s exports remain unimpressive at best. While the stock market is setting new records, the export sector is stuck in neutral (31.7 Billion USD in 2022 Vs. 30.09 Billion USD in 2024), held back by currency woes, energy shortages, and a lack of competitive innovation. Perhaps investors are betting on Pakistan exporting optimism—because tangible goods certainly haven’t filled the container ships.Poverty and Inflation: The Stock Market’s Ugly Cousins
It’s worth noting that the vast majority of Pakistanis don’t have portfolios stuffed with blue-chip stocks. For them, the PSX rally translates to exactly nothing. Poverty remains entrenched, and inflation continues to drain household incomes like a silent thief in the night. The Consumer Price Index (CPI) remained at around 183 Points in July 2022, whereas it is now around 265 points. But wait, the Government has announced that the inflation has reduced to 4.9%. Well, this is just because the Government is taking the previous year as its basis of calculation, when the inflation was around 40%. This means that something costing Rs. 100 in 2022 was priced at Rs. 140 in 2023 and now a 4.9% increase means an increase of Rs. 6.86 on top of it, rather than a simple Rs 4.9 as it appears in the simple terms of percentages.The disconnect couldn’t be clearer: While stock prices soar to the moon, everyday citizens are left wondering if they can afford next week’s groceries.
Political Connections: A Convenient Coincidence?
To add a sprinkle of irony, the governing party’s deep ties to industry raise a few eyebrows. When those with political influence happen to be the same folks who benefit from inflated market sentiment, it’s hard not to suspect a carefully curated image. Boost investor confidence, spin the numbers, and voila—the PSX becomes a shiny trophy to show voters, even if the economy underneath remains creaky.Liquidity and Speculation: The Real Fuel Behind the Surge
So, what’s really driving the stock market? Hint: It’s not skyrocketing production or innovative exports. Instead, it’s the usual cocktail of liquidity injections, speculation, and investor sentiment. The State Bank’s monetary easing has thrown a lifeline of cash into the markets, and short-term speculators are riding the wave. But when the tide goes out, one can only hope the economy isn’t left stranded.Conclusion: Do the Numbers Add Up?
In a word: NO!. The PSX’s meteoric rise is out of step with economic fundamentals. GDP growth is weak, LSM is stagnating, exports are uninspiring, and poverty is stubbornly high. The stock market may look like a symbol of prosperity, but without real economic improvement, it’s little more than an illusion—a golden balloon full of hot air.So, while the PSX breaks records, the real economy waits for its turn to shine. Here’s hoping the glitter doesn’t fade before the ground beneath it solidifies.
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