FEARS of political turmoil have driven consumers and investors to the sidelines. The growing anxiety was reflected in leaner activity in Pakistani markets last week. As expected, the perception-based businesses — the capital market, commodity futures trading and real estate — were hit the hardest by the charged political environment.

Speculators and individuals’ economic behaviour tends to be more sensitive to a perception of impending crisis as compared to institutions and the corporate sector. The first two segments get easily excited and exhibit herd mentality while the second two take a longer-term dispassionate view based on economic fundamentals and tend not to react instantly to possible disruptions.

Speaking to Dawn, trend watchers and economic players confirmed that markets across the country, from retail to real estate, witnessed subnormal levels of activity last week after the Joint Investigation Team (JIT) findings were announced.

Speculators and individuals’ economic behaviour tends to be more sensitive to a perception of impending crisis as compared to institutions and the corporate sector

As much as the PML-N tries to project positive ties between the fortunes of the party to the country’s economy, and interprets lack of investors and consumer interest as a sign of its popularity, most businessmen attributed it to uncertainty.

However, many dismissed the dullness as a routine post-Eid occurrence. “After hyperactivity in the market during Ramazan and Eid, when most households overspend, every year markets experience a month-long sluggish period,” observed a bank analyst not permitted to make public comments. “I don’t think ordinary people care so much about politics and politicians. The demands of an average family of limited means are basic and generally inelastic. Yes, privileged spending classes might abstain from excessive indulgence if they see an impending crisis, but they make up small fraction of the population.”

Some others disagreed. “What’s the point of dismissing something that is so obvious? Who has not noticed empty roads and deserted markets? You can interpret this the way you want but markets were sluggish the entire week,” one observer insisted.

“People are not stupid. They have seen it all many times over. They know the JIT report and the extreme positioning of the parties signal the start of another phase of crisis. They prefer to keep cash handy by controlling avoidable spending for now. It makes perfect economic sense,” he added.

Tariq Mahmood Butt, a leading meat exporter and value-added producer, thought it was unwise to read too much into something that everyone expected. He said the market for his range of products was down by as much as 50 per cent. “I was talking to a proprietor of a very popular chain of megastores the other day. He also said that sales were down significantly,” he said.

He did not link the drop to the current situation, but to the cyclical movement of consumer demand after Eid.

The officials of several mutual funds reached over the phone regretted the timing of the crisis and told Dawn that they were counting on institutional support at this point in the capital market. Hamad Aslam, a senior analyst at Elixir Securities, said that this was the time to build on gains of companies that commanded exceptional businesses during the Eid spending surge. However, the market crash has changed the tone of discussion in investors’ circles.

He pointed out the diversion in behaviour of the small retail investor and mature high net worth investor or institutions. He thought that margin calls by small investors have contributed to a free fall in the capital market. “The market fundamentals have not changed. We see good buying opportunity for long-term investors at bottoms,” he said.

Some institutions that track and gauge market activity declined to offer comments. “We base our analysis on hard facts. Pakistan is a big market with multiple layers and varied segments. The compilation and dissection of data takes time. We will be in a position to give our input after we complete the requisite exercise,” said a corporate communication head of a market research company.

Abdul Wahab Parekh, a leading property dealer, said pending real estate deals were piling up as reluctant investors opt to hold their decision for now. He believed the market was stable but the number of deals and transfers went down. “The level of activity has been down for the past two months. A week is too short a time to assess the trend in the real estate market. There are buyers, but sellers are few and not inclined to strike a deal in haste,” he told Dawn over the phone.

“The deal making has dropped. In place of 100 deals a day in private housing 20 are being consummated currently. There is no better option available and money floating around will ultimately land in this sector,” he added.

Property dealers were not particularly concerned and expected the business to pick up eventually as investment in this sector has been perceived to be the most secure and lucrative.

Published in Dawn, The Business and Finance Weekly, July 17th, 2017