PSX index hits new high after inclusion in MSCI emerging markets index

Pakistan’s shares posted their biggest weekly gain in three years to a new all time high in the run-up to the inclusion in US market index provider MSCI’s emerging markets index.

“The benchmark KSE-100 index catapulted to its all time high this week and closed at 38,776 index level. This was on the back of MSCI announcement on last Wednesday where it upgraded Pakistan to emerging market status, effective 2017,” Topline Securities said in its weekly market review. “The market for the week is up five percent (1,836 points), highest weekly gain since first week of July 2013.”

Analysts expect by putting Pakistan on the radar screens of international fund managers, the upgrade is expected to bring million of dollars of fresh money to the market. They expect arrival of $600-$800 million within one year after induction of the index on June 1, 2017.  A report by Arif Habib Limited, however, said investors would remain caution on other international events such as the ‘Brexit’ (Britain exit from European Union) referendum due on June 23, 2016 and trajectory of oil prices.  Dealers said investors are already putting the lion’s share of their money in those stocks which seem absolutely certain to be chosen in the MSCI index. But most stocks will be neglected and the trend may leave the top stocks vulnerable to profit-taking in coming months,” said a dealer.

Immediately, nine stocks in large and mid-cap category; HBL, UBL, MCB, LUCK, ENGRO, HUBC, OGDC, PSO and FFC lured the maximum investor's interest, said a report of Elixir Research.  Banking sector remained the best performing sector during the week, posting 13.1 percent return with HBL, MCB and UBL posted double digit return of 20.9 percent, 14.8 percent and 12 percent respectively. These three banks, cumulatively, added 901 points in the index. Faizan Ahmed, analyst at the JS Research, said the re-inclusion incited broad based buying interest and market witnessed historic highs during the week with key interest in the list of stocks to be included in both small-cap and main index. Dealers said the market completely disregarded negativities such as Pak-Afghan border tensions and turbulence on the political landscape amidst euphoric trading sessions after the MSCI’s decision. Moreover, investors also showed insensitivity towards 6 percent week-on-week decline in the international crude prices as observed from 0.4 percent week-on-week increase in index heavyweight oil and gas sector.

KASB Securities’ report said they expected volatility to increase next week with lower volumes. “With MSCI re-classification euphoria is likely to relatively subside the global event slated for next week is the referendum on Britain exit from European Union,” it said. On percentage point criteria, Feroze1888, Habib Bank Limited, Pak Services, Searle Pakistan and National Refinery were the major gainers while E.F.U. Life Assurance, International Steel Limited, Indus Dyeing, Associated Services Limited, and Bannu Woollen were the major losers in the benchmark KSE-100 this week.