Markets Amid The AFGHAN SANDSTORM: By Shibasradha Nahak

``We have won the war, America has lost,'' this has been said by the Taliban Leader which clearly emphasizes that after 20-years the American era in Afghanistan came to an end when the Taliban seized the capital, Kabul. This blisteringly swift takeover of Kabul has astonished the security, diplomats, and capitalists of all across the globe, and this is not going to affect Afghanistan only but also the South Asia region with "change things upside down" in geopolitical implications. The currency Afghan afghani jumped to a record high of 86.15 per dollar. Also, there are no more dollar shipments by Da Afghanistan, which is the Central bank of the country, due to this unsteadiness which can be attributed to an irregularity in the international market.

There is not a single factor that influences the financial market rather it be insecure investors, export/import business, small scale business, etc. After demolishing the Government, there was complete chaos for millions of people who are still trying to leave the country and this mass departure can result in a negative effect on every sector due to a deficit in human resource capital. After the Taliban’s acquisition, the land of Afghanistan cannot be used by any of the foreign countries. So, many foreign investors are now facing inferior opinions about their investments and plans in Afghanistan.

BLOODBATH IN THE DESERT – BLOODBATH IN THE GLOBAL INDICES

Many countries have invested in Afghanistan, but the US was playing a crucial role in stepping up and helping the war-torn country by financially backing them with $2 trillion, floating it to different sectors like defense, infrastructure, R&D, etc. Europe has remained a silent force in the desert country supporting the US aid in the country. But with President Joe Biden announcing the complete withdrawal of forces, Europe has called out the US administration for being “too hasty” and this replicated in the market’s behavioural changes seen mostly in the European region because many defense large-cap companies like Boeing, Raytheon, Lockheed Martin, etc., were playing a crucial role in defense stocks during the decades-long Afghanistan War.

After this sudden plan of retrieval by the US, indices like FTSE 100 dropped by 0.90%, STOXX Europe 600 lost 0.50% also DIJA and the S&P 500 are also down by 0.065%, and 0.23% respectively. As fears of the draconian Taliban rule became harsh reality, Asian markets too remained in the red displaying a grim foreboding of what was about to take place next in Afghanistan, stocks like Shanghai Composite Index and Hang Seng were down by 0.1%, Kospi sank to 0.8%, whereas Nikkei 225 in Tokyo gained 0.2%. Afghanistan’s fall caused most of the International Market Indices to go into freefall and this strand can continue to affect the global markets and it will not wear down anytime soon.

HOW INDIAN INDICES ARE RETALIATING TO THE AFGHAN ALERT

India is the fifth-largest donor globally with over $3 billion investment in the last 20 years and the top investors are WAPCOS Ltd, KEC International Ltd, etc, and they worked on more than 400 projects in Afghanistan. The bilateral trading between India and Afghanistan was $1.4 billion in 2019-20, whereas it increased to $1.52 billion in 2020-21 with companies like Meir commodities, Sai International Exports, Cooper Pharma, etc being the top export companies of India, they used to trade with a volume of $1.5 billion with most of the export materials are pharmaceuticals, cement, sugar, tea, and other consumable items. Because of the unease in the country and the sudden government upheaval, the share price of Cooper pharma and Aurobindo Pharma, which are one of the largest pharmaceutical exporters in the country were down by -1.38%, and -5.93% respectively.

While the imports from Afghanistan were around $510 million in 2020-21, Afghanistan is also known for exporting dried raisins, walnuts, almonds, and other fresh fruits due to its economy being mostly of an agrarian nature. Due to this apprehension, the fruit trade might be disrupted completely, and the dry-fruit prices may increase which can make the festivities around the globe less sweet. The trade margin will be lowered as export business deals are mostly carried by government-to-government contracts. With the collapse of a legitimate democratic government in Afghanistan and unsavory political developments, India’s equity market is continuing with its strong positive traction, and the market is expected to remain bullish in the long term, as Sensex was closed at 55,582.28 and Nifty 50 was closed at 16563.05 with insignificant changes in their figures. So, this leads to the resolve that the Indian market is not impacted much by the disruption in Afghanistan with which it had a bustling trade relationship.

FUTURE OF THE BARON LAND

Afghanistan's economy is nothing but an economy that is "shaped by fragility and aid dependence". And it was reshaped when the US started inflowing huge investments of around $2.2 trillion since 2001. Because, if a person had invested $10,000 in the defense stocks during the initial stages of the Afghanistan war then now the value of these stocks would be around $100,000, and the selected top three defense stocks which took the cake were Lockheed Martin, Boeing, and General Dynamics. While contrasting previous year’s data with the current year the overall stock market Afghanistan Stock Exchange (ASE) has gone down by -10.36%. The future does seem dismal and without hope, but surplus resources like nickel, cobalt, copper, etc, and having one of the key substantial resources like lithium which is next to the ‘Saudi Arabia of lithium’ can result in countries like China and Pakistan to consider trading relationships even though EU, Britain, and Australia have already denounced the Taliban led regime. In the future, if the Talibani government decides to allow private players and large-cap players then a reformation of the growth can be re-established, and the economy can be rejuvenated and can be retained for a longer period.

But will verbal reassurances from a terrorist organization that has not been able to sway its people be taken positively by external business enterprises? It does give you something to ponder upon.

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