June 10, 2021 (MLN): Since the great plunge in the wake of the first coronavirus-induced lockdown in March 2020, Pakistan’s equity market had an impressive recovery to become the second-best performing major stock exchange index (KSE-100) in Asia, giving a 42.13% return in 9MFY21 – only behind India’s Sensex, noted the 2020-21 Economic Survey released on Thursday.
According to the survey, “the increase in the KSE-100 index was driven by government’s large stimulus package, central bank’s stable policy rate, an uptick in large scale manufacturing, improvement in external accounts and reforms introduced by the Security and Exchange Commission of Pakistan (SECP) and PSX in the wake of COVID-19.”
The most encouraging part about the outgoing fiscal year (first nine months) was the initial public offering of five companies on the PSX. “Such a large number of new issues and mobilization had not taken place for some years. The number of debt listings was also relatively higher this year,” it noted.
The market capitalization also grew 20.9% to Rs7.89 trillion from Rs6.53tr whereas the shares turnover reached 4.73bn from 3.68bn. There was a noticeable increase in average daily volume during the fiscal year (up to Apr 8) which jumped to 553.75m from 323.51 in 2020. Since then, the PSX has twice broken record volumes, once almost the 2tr mark.
Sector-wise, the biggest movers in percentage terms by the end of March were refineries, soaring by 172% compared to June 30, 2020, followed by technology and communication 135.1% and engineering 112.6%. Meanwhile, the biggest laggard was vanaspati and allied industries whose market cap plunged by over 75%.
On the debt side too, the year saw a fair bit of activity with 17 new instruments in total coming online of which the only one was listed (a Sukuk). The cumulative amount of all these debt securities was Rs96.9bn. The survey gave the total stock of outstanding corporate debt at Rs782.875bn at the end of March with a lion’s share made up of Sukuk, hinting at the prevalence of Islamic financing in debt.
This was in line with broader trends in Islamic finance as, during July-March FY21, the SECP issued certificates of Shariah compliance to seven companies in terms of the Shariah Governance Regulations, 2018, for the development of the Islamic financial and capital market. It also gave a nod for Sukuk issuances worth Rs280bn, including the “Power Energy Sukuk-II” by the Government of Pakistan worth Rs200bn and “Pakistan International Airlines Corporations Limited-Sukuk” worth Rs20bn.
With regards to Funds, assets under management of mutual funds as of Dec 31, 2020, stood at Rs985.18bn – dominated by the money market funds with the largest share at 41.84% of the industry, followed by equity funds comprising 24.5% and income funds at f 24.08%.
There were also a number of initiatives to promote the capital markets such as the digital onboarding for Central Depository Company accounts, the launch of secured transactions registry for unincorporated entities, and opening of accounts for non-resident Pakistanis under RDA, which has since been expanded from not just debt instruments and deposits but also a car financing scheme.
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