January 05, 2023 (MLN): The year 2022 remained a melting pot for Pakistan Stock Exchange as one tornado came after another which brought down the benchmark KSE-100 index, as this seesaw year has wiped out 4,927 points or 11% YoY to close a rocky year at the 39,669 level.
Throughout the year, the index remained in pressure as investors seems jittery about raging political turmoil, delays in the IMF loan program, high inflation, the war in Russia and Ukraine, higher commodity prices, energy shortages, soaring trade deficits, import restrictions, large external debt service and rapid reserve depletion.
Adding to the woes were increase in policy rate to 16% to reduce demand and anchor inflation and the persistent depreciation of the PKR against the USD which reduced investors' buoyancy.
“In USD terms, the return was even more disappointing (-30.4% YoY) given the relentless pressure on the Pak Rupee in the outgoing year”, as per Arif Habib “Pakistan Strategy 2023” report read.
The equity bourse posted a remarkably dull performance during year 2022, as the one-year return declined by 0.68% YoY.
The average traded volume of the KSE All index at the end of the year stood at 229mn shares down by 52% YoY, while the average daily traded value dropped to USD34mn decreased by 67% YoY.
On monthly basis, continuing concerns on political clarity, deteriorating macros and elongated talks with the IMF pushed market participants to maintain a sell strategy in December 2022, the report by JS Global read.
The declining confidence hammered the benchmark KSE-100 Index throughout the month, closing with a negative 4.6% return and marking the worst December in the last four years, it added.
“It is pertinent to highlight that despite the year being relatively disappointing for equity market investors, PSX fared much better in terms of local currency return compared to other international markets”, the report by Arif Habib Limited noted.
From the sector-specific lens, the major underperforming sectors during the year were Banks (-1,844 points), Cement (- 1,384 points), Pharmaceutical (-494 points), Steel (-311 points), and Food Producer Companies (-295 points).
On the flip side, the sectors that were able to outperform the benchmark index were Fertilizer (619 points), Power (31 points), and Technology (287 points), Chemical (103 points).
Scrip-wise, HBL, LUCK, and SEARL underperformed during the month as they took away 847, 660, and 250 points from the index respectively, whereas SYS, POL, and HUBC were the best performing securities during the year 2022, cumulatively adding 1,149 points to the index.
On the NCCPL front, aggressive foreign selling continued during the year as foreigners offloaded $48mn worth of securities from the equity market, as compared to $350mn previous year. The majority of the selling during the month was witnessed in Banks ($127mn), Cement ($15mn), and Fertilizer ($13mn).
On the local side, the majority of the selling was absorbed by Banks, Individuals, and Organizations amounting to $137mn, $133mn, and $74mn respectively. However, Mutual Funds and Insurance companies stood on the other side with net selling of $181mn and $130mn respectively.
Market Outlook:
Going forward, it is expected that the KSE-100 index in current year 2023 will oscillate between 40,000-50,000 level due to ongoing economic instability in country.
Due to dollar shortages, the companies face external payment issues to importers, and energy shortages forced the industries to close their plants.
“Our forward P/E (Price to Earning) for 2023 arrives at 3.8x, which is even lower than the trough P/E of the 2008 financial crisis (4.1x), and at a noteworthy discount to historical average P/E of 7.9x. While earnings growth is expected at 11.8% in 2023,” a report by Arif Habib Limited read.
In its “Pakistan Investment Strategy 2023”, the researcher said that Pakistan, which remains engulfed in huge external debt issues, requires the International Monetary Fund (IMF) programme to alleviate its economic woes.
Further, GDP growth is expected to be 1.78% during FY23, compared to 5.97% last year. The decline is attributed to flood devastation, delays in external financing, political noise, high inflationary pressures and monetary and fiscal tightening., it added.
The current account deficit is expected to narrow down to $7.2 billon i.e., 2% of GDP, in FY23.
“A combination of lower revenues, higher flood spending, and rising borrowing costs is likely to keep the fiscal deficit around Rs5 trillion (5.9% of GDP).
“AHL expects a tight monetary policy stance to continue until August 2023. We expect inflation to ease off to 11%-13%, providing room for a rate cut. With international commodity prices down and the high base effect kicking in, inflation should come down, in 2023,” it said.
“We do not eye much of an improvement (at least in 1H) for the PSX in CY23. Pakistan it seems is caught in the midst of a perfect storm of adversities with spiraling inflation, falling reserves and external vulnerabilities’, a report by AKD added.
Furthermore, politics appears to be a nightmare the country is unable to wake up from while the recent floods appear to have been plagiarized right from Moses’ biblical story, it added.
Copyright Mettis Link News
Posted on: 2023-01-05T12:35:44+05:00
