KARACHI: Pakistan stock market witnessed a challenging year in 2021 underperforming to regional markets as well asset classes amid concerns on external accounts, delay in International Monetary Fund (IMF) program, and continuous foreign selling, which let bearish trends to dominate the market during the whole calendar year.
Stock market posted a meager return of 2 percent in the year while in dollar terms, the market tumbled by 8 percent during the CY2021, compared to average return of 10 percent during the last 10 years.
After posting 8 percent return in 1HCY2021, the benchmark KSE-100 index plunged by 6 percent amid widening twin deficits (trade and current accounts) due to record increase in global commodity prices translating into inflationary pressures, said a research report of Sherman Securities on the performance of equity market during the year under review.
CY2021 performance also remained dismal compared to last 10-year average return of 17 percent while relative to last five years, the return was almost at par, brokerage firm stated.
However, the only silver lining was that the average volume traded reached 474 million shares a day — highest in the last 10 years.
The average volume traded jumped by 44 percent in 2021 compared to average of 330 million shares in 2021.
Similarly, during CY2021, average daily turnover was recorded at Rs17 billion up 38 percent compared to the last year’s average of Rs12.3 billion.
Securities firm noted that Pakistan in CY2021 also remained laggard as the country’s return of –31 percent (based on MSCI Pakistan Index) was not only the lowest amongst 21 frontier markets but also lowest amongst 26 emerging markets. Pakistan market was downgraded to frontier from emerging in Nov 2021.
Topline Securities, in its report on the performance of equity market, said that year 2021 remained a tough year for Pakistan’s benchmark KSE-100 index as the index underperformed regional market and other asset classes. KSE-100 index was up 2 percent (US$: -8 percent) in 2021, which was much lower than last 30-year CAGR of 12 percent.
Index is now 16 percent down from its 53000 peak seen on May 24, 2017. Market capitalization is down 14 percent in a year in US$ terms. Market capitalization is now US$43 billion compared to all time high of US$100 billion seen on May 24, 2017.
Brokerage house noted that the index underperformed regional market posting -8 percent return in US$ terms compared to its regional players like Sri Lanka, India, China etc.
The index also underformed MSCI frontier Market (MSCI FM), which gained 16 percent. On other hand, MSCI Emerging Market (MSCI EM) fund was down 5 percent.
Similarly, all other asset classes (Crypto, Real Estate, and Roshan Digital), performed much better than the equity markets.
Cryptocurrency, which is not officially recognized by Pakistan, remained the best performing asset class in Pakistan in 2021, posting return of 79 percent in PKR terms. This was followed by property and Roshan Digital Dollar Certificate which posted returns of 23 percent and 18 percent respectively in Pak rupee terms, stated Topline Securities.
It pointed out that the country’s weak external account situation and rising interest rates led to reduced interest in Pakistan equities.
To note, KSE100 index peaked in 1st half of 2021 at 48,726 index level on Jun 14, 2021 and since then, it is down 10 percent due to major economic concerns.
Huge activity was witnessed in mid and small cap companies led by retail investors which drove the overall trading activity at the bourse at PSX in 2021.
Arif Habib Limited, in its research note on the performance of the market, stated that given the volatile conditions, activity gained traction with record high average volumes witnessed in CY21 at 474 million shares against 330 million last year alongside highest ever average value traded at Rs16.9 billion, compared to Rs12.3 billion in CY20.
With impressive growth in volumes at the bourse, capital raising this year arrived at a record high of Rs19.92 billion in CY21. Total transactions include 6 new listings (PTL, SGF, CPHL, PABC, AIRLINK, and OCTOPUS) as well as two new Gem board items (GEMUNSL and GEMPAPL).
Sectors leading the contribution chart this year include Technology & Communication (1,003pts) amid re-rating and foreign interest, followed by Commercial Banks (921pts), which posted robust profits despite low interest rates in most part of the year, brokerage firm said.
On the flipside, sectors eroding market gains in CY21 include Cement (373pts) given multi-year high coal prices raising concerns over outlook of margins, and Oil and Gas Marketing Companies, due to rising gas circular debt (347pts).