US diplomat case may affect Pakistani stock market

ISLAMABAD - The tone of the stock market in Pakistan for the next few weeks may be adversely affected due to the current sensitivity of ties between Washington and Islamabad, after a US diplomat was arrested in Lahore for shooting two Pakistani nationals, a top economic analyst has said.

Pakistani investors are worried about the outcome of the Raymond Davis case and its affect on the Pakistan-US relations, as any rift in the ties might affect the country’s stock market, according to Xinhua.

The Davis case is still underway in Lahore High Court. The court has directed the Pakistani government to decide within 15 days whether the claim made by US that Davis is a diplomat is justified or not.

Saif-ul-Islam, director of the Islamabad Stock Exchange, said though the decision on Davis is still to be taken by the court, yet it has already started affecting the stock market.

“The Pakistan-US relations are very sensitive with regard to the stock market. Any strife in the relations directly influences the market in a negative manner,” Islam was quoted as saying.

During the current fiscal year, stock markets in Pakistan, especially the Karachi Stock Exchange, have seen a bullish trend mainly due to growing foreign investment.

A 15 percent of foreign direct investment (FDI) and 94 percent of the portfolio investment in the first seven months came from the US.

FDI involves participation in management, joint-venture, transfer of technology and expertise in another country.

Portfolio investments include purchase of shares and stock in a foreign company, purchase of bonds issued by a foreign government or acquisition of assets in a foreign country.

Most of the products from Pakistan are exported to the US, though only three percent of total imports come from America.

Any change in bilateral relations would also have an overall impact on Pakistan’s Pakistan.

Islam said the present political situation in the country might also have a negative effect on the stock market. The ruling Pakistan Peoples Party (PPP) and the main opposition Pakistan Muslim League-Nawaz (PML-N) are at loggerheads on many issues.

“Political and diplomatic stability is the urgent need of the hour to bring the country out of leadership and economic crisis,” he said.

Police in Lahore arrested Davis after he shot dead two Pakistani people in a busy market area. Later, Davis told investigation officers that he killed the two in self defence as they were trying to rob him.

The US has said Davis is a diplomat and should be granted immunity. John Kerry, chairman of the US Senate’s Foreign Relations Committee, also visited Pakistan to discuss the issue with the country’s top leaders.