The Pakistani Equity Market in 50 Years: A Review

The equity market plays an important role in the economic development of a country. However, in Pakistan the equity market has not played its due role because of interventionist economic policies and over reliance on debt financing. It was not until the middle of 1980s that the importance of the equity market was recognised and steps were taken to activate the market. However, the market actually became active in the beginning of 1991 when it was opened to foreign investors, besides other liberalisation measures. Since then the market has made considerable progress and improved in size and depth. This paper reviews the performance of the Pakistani equity market in the background of Pakistan's'Golden Jubilee programme. The information was collected from the Corporate Law Authority (the regulatory body), the State Bank of Pakistan (the central hank), and International Finance Corporation (a branch of the World Bank). The paper shows that the Pakistani equity market gained momentum in the 1960s and made significant progress in listings and market capitalisation. However, the market lost its momentum in the 1970s due to political turmoil in the country and the nationalisation policies adopted by the then government. Though the policy of greater reliance on private enterprise restored the market sentiments in the 1980s, the market actually regained its momentum in early 1990s when it was opened to international investors. In terms of its performance. the market was ranked third in 1991 among the emerging markets. Unfortunately, the market could not maintain its performance in later years because of economic and political instability. A series of political changes in the country, ethnic violence in Karachi, increasing inflation and unemployment rates, widening budget deficits, etc., proved to be detrimental to business activities.