June 1, 2021 (MLN): Following three months of correction, the KSE-100 index made a strong comeback and posted a sharp ricochet of 8.21%, or 3,634-points during May’21 %, which is the highest monthly gain in 9 months.
In the earlier part of the month, investors chose to remain sideways, however, after extended Eid holidays, they returned to the bourse on account of several positive factors, allowing the benchmark to break a three-month-long losing streak and settled at 47,896 points, slightly below 48,000 mark.
While reviewing the monthly pattern, it shows that much of the optimism at the bourse mainly stemmed from the revised GDP growth rate of 3.94% for FY21 against a negative 0.47% last year. This resulted in a remarkable turnaround and also triggered market gains. While positivity at the index was also imparted amid a declining trend in the COVID-19 infection ratio, which obliged ease in lockdown.
By the end of May, new daily cases declined to below 2,000 from a recent peak of 6,000 cases. The positivity ratio dropped to 4% against 11% in April. The 10 days lockdowns leading up to Eid and other restrictions imposed by the government such as curfews in cities with over 15% positivity ratio and shorter business hours, appeared to be bearing fruit.
According to the report by Intermarket Securities, the noticeable reduction in Covid-19 cases was supplemented by expectations of a pro-growth Budget FY22. Positive news flow on the upcoming Federal Budget FY22 which is due on 11 June, helped bolster investor sentiment. The government may look to increase the fund for drawback of duties and taxes for exporters (extended to textiles, pharmaceutical, 2/3 wheelers, refrigerators, washing machines, and transformers). The government is also set to unveil an agriculture reform package worth PKR110bn to lift farmers’ income. The budget is also expected to be aligned with IMF conditions.
Moreover, SBP maintained policy rates of 7% on May 28, 2021, further strengthened investors’ confidence. Although the decision was consistent with SBP’s earlier guidance and market consensus, the KSE-100 rallied 2% in the following trading session.
Other positive factors that boosted investors confidence during the month include, MSCI’s Semi-Annual Review, whereby Pakistan’s weight has increased from 0.016% to 0.023% given inclusion of LUCK and TRG in the EM Standard index, maintenance of current account surplus during 10MFY21 at USD 773mn, historic high remittances of USD 2,778mn witnessed in Apr'21, up by 56% YoY, tax collection exceeding the PKR 4.143trn for the first time in 11MFY21, cancellation of a governments divestment plan for OGDC and PPL coupled with higher oil prices which ignited buying interest in the E&P scrips, and development of a local coronavirus vaccine.
Sector-wise, Commercial Banks, Cement, Oil & Gas Exploration Companies, Oil & Gas marketing Companies, and Fertilizer emerged as the best performers during the month, as they contributed around 767, 591, 338, 285, and 272 points respectively to the benchmark index.
In particular, the scrips of LUCK (+250), HBL (+220), UNITY (+187), PPL (+175), and PSO (+138) turned out to be the most pleasing ones.
During the month, the All-Share Market Cap increased by nearly USD3.247 million, i.e., 6.46% higher than the previous month. In terms of PKR, the All-Share Market Cap surged by Rs.548.9 billion i.e., 7.11% higher as compared to the last month.
Figures released by NCCPL showed that foreign investors sold a net USD43.4 million worth of stocks during the month with foreign corporates doing the bulk of selling at USD34.25 million, followed by Overseas Pakistanis that sold stocks worth USD7.6 million.
On the local front, Individual investors purchased USD 26.12 million worth of stocks, followed by USD 17.09 million and USD 14.4 million worth of stocks bought by Other Organizations and Local Companies, respectively. Other significant transactions included USD 11.4 million and USD 7.4 million worth of stocks sold by Insurance Companies and Mutual Funds, respectively.
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