Here Is How A Trump Win Affects Pakistani Markets

Donald Trump as U.S. president could mean “an overhaul in the US-Pak relations,” analysts at AKD Research said in a report. According to the report, “In this backdrop, Pakistan has done well by diversifying its foreign relations towards Russia and China’s ongoing ambitions in besting heavily into Pakistan.”

Although Pakistan’s stock exchange could be volatile in the near term, the Pakistani market’s correlation with regional markets has decoupled while momentum in infrastructure and economic development have resulted in a 21 percent gain in the KSE100, which may continue in the medium to long term, the analysts mentioned.

Implications For Pakistan

The AKD Research mentioned the following possible implications for Pakistan:

• Lower aid from the United States: Economic assistance may stagnate at the current levels and military aid may be significantly scaled back.
• Macro implications: Any trade facilitation to Pakistan continues to be unlikely under Trump’s presidency. Moreover, investment from the United States could also be low. The United States may impose stricter immigration rules, affecting remittance flows form the United States.
• Rate hikes: Trump becoming president may fuel expectations of faster rate hikes, which impacts foreign flows to Pakistan.

“[T]he Pakistan P/E discount to regional markets remains sizable, while D/Y [dividend yield] is attractive and expected to continue attracting interest,” the analysts commented.