Panos Mourdoukoutas
For almost two decades, Pakistan has led America to believe that it is an indispensable ally in fighting Taliban in Afghanistan. That’s why Washington threw a great deal of money to Islamabad. Like a $12 billion IMF brokered debt relief package in December 2001, which sparked Pakistan's fifteen-year bull market.
But all that money seems to have been wasted, according to Middle East security expert C. Christine Fair. Pakistan has been assisting the enemy. “By 2005, the Afghan Taliban, with strong support from Pakistan as well as from the Waziristan-based Haqqani Network, had launched an insurgent campaign against U.S. and ISAF missions even while Pakistan was being remunerated handsomely for its role as purported “coalition partner,” says Fair in “Pakistan’s Deadly Grip on Afghanistan," published in the April 17 issue of Current History.
Nonetheless, America continued to “scale up” its support for Pakistan for many more years. “More than fifteen years have passed since the United States launched operations in Afghanistan, ostensibly with the support of Pakistan,” notes Fair. “During this period, the Americans scaled up and then scaled down troop deployments and investments in Afghanistan’s economy, infrastructure, civil society, and armed forces, but never managed to deal with the simple fact that, throughout this war, they have depended on one country that was steadfastly opposed to US and NATO objectives: Pakistan.”
Until this week, that is, when the Washington made it clear that will no longer tolerate Pakistan’s games, imposing sanctions on government officials and cutting back aid. Washington is further looking into Pakistan’s primary adversary, India, to advance its policy agenda in Afghanistan and elsewhere in Asia. Like the South China Sea, and the Indian Ocean, where America has been trying to tame China’s ambitions to write its own navigation rules.
That’s good news for India that now has America on its side in its efforts to maintain influence in Pakistan and Afghanistan, and to contain China in its northern border.
Meanwhile, America’s major policy shift in the region couldn’t come at a worse time for Pakistan’s equity markets, which have already been suffering hefty losses from corruption scandals that brought down the Sharif government.
Pakistan’s stock market has been on a tear in recent years. The country’s main KSE index has gained close to 400% since 2009, and 40% in 2016 alone. But it has lost close to 20% in the last three months alone.
Meanwhile, India’s market has gained close to 6%.
Apparently, geopolitics are catching up with emerging market investors.
| Index/Fund | 3-month Performance | 2-year Performance |
| Global X MSCI Pakistan (PAK) | -20.93% | 3.95 |
| iShares S&P India 50 (INDY) | 5.79 | 31.96% |
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