PSX emerges 2nd best performing market in region

KARACHI: Pakistan stock market emerged as the 2nd best performing market in the region and 7th in the world during the outgoing month, according to a brokerage report.

The KSE-100 returns of 5.8 percent have outperformed last 10-year monthly average returns of 4.1 percent.

The No. 1 was Sri Lanka with 24.4 percent. China was on the number third with 4.3 percent, followed by Taiwan (3pc), Thailand (1.4pc) and South Korea (1.1pc). The markets which saw negative returns included Indonesia (1.6pc), India (2.8pc), Vietnam (4.1pc) and Philippines (7.5pc).

The USD-based return for the month settled at 5.8 percent in the Pakistan Stock Exchange (PSX) while during the seven months of current fiscal year 2020/21 returns of the index have settled at 34.8 percent (USD-based: 41.4 percent), according to Arif Habib Limited.

Historically, PSX has seen healthy returns during January.

“The rally during the outgoing month has primarily been led by confidence in the overall investment climate fueled by the ongoing robust economic momentum across the country,” the brokerage said in a report.

Large scale manufacturing sector showed a highly encouraging 14.5 percent growth during November which was at least a 12-year high.

Moreover, remittances once again clocked in north of $2 billion ($2.4 billion during December) to provide crucial support to the external sector.

“The plan for circular debt clearance was also announced this month which lured bulls in the power sector.

The said plan involves the first installment (40 percent) to be paid in February (33 percent cash, 33 percent Sukuk and 33 percent floater PIBs) while the remaining is expected to be paid in 6 months with same structure,” said the brokerage.

The technology sector also saw phenomenal gains during the outgoing month on the back of re-rating of the entire sector.

IT exports posted a 44 percent jump during December while registering a 40 percent increase during 1HFY21.

Other reasons for the optimism during January included the diluting political noise.

“Moreover, jubilant activity across cyclical sectors is likely to translate into healthy earnings during the outgoing quarter which has also kept the sentiment upbeat,” said the brokerage.

The State Bank of Pakistan announced its monetary policy rate this month, holding rates stable at 7 percent. Since June 2020, the rate has been unchanged.

The policy rate is likely to remain stable in the near-term, while any monetary tightening when the need arises will be gradual and measured.

“Forward guidance provided much needed clarity to investors and to the business community and helped to evaporate any uncertainty over the interest rate outlook, which helped uplift sentiment in the local bourse.”