October 1, 2019 (MLN): With the month of September coming to an end, we have finally bid adieu to the first and yet, quite challenging quarter of the ongoing Fiscal Year. While Pakistan continued to face unrelenting economic challenges throughout the quarter, we saw the capital markets heading towards recovery during the month of September.
The KSE-100 index lost nearly 1,822 points during the quarter, and closed at 32,078-mark. This translates into a decline of 5.38%, as compared to the previous quarter’s closing of 33,901 points. With regards to monthly performance, the benchmark index showed a surprising recovery as it gained approximately 2,407 points, i.e. an improvement of 8.11%. Thankfully, this improvement in performance broke the index free from a seven-month long stay in the red district.
A lot of factors played a role in driving the index to where it is now. One of the biggest as well as most anticipated event was the financial assistance worth $6 billion rendered by the International Monetary Fund (IMF) to Pakistan. This event singlehandedly drove the index up by 3% in the first few sessions of the said period.
Unfortunately, this evolvement in equity markets proved to be momentary, as Government soon after decided to set aggressive tax collection target of Rs 5.5 trillion, despite worsening economic conditions of the country. The rise in price levels which resulted from this unreasonable decision ultimately dragged the benchmark index down by nearly 15% in the first half of the quarter.
The subsequent phases of the quarter, especially the last month, provided some respite to the capital markets as the country witnessed improvement in several economic indicators, including decline in current account deficit and stability in exchange rate. Moreover, mounting tensions with the neighboring country proved to be harmless for the benchmark index, as the latter continued to rise on the back of improving economic setting.
Another recent development that built a buzz amongst local investors was the decline in market yields of PIBs and T-bills. This decline in returns resulted in many investors switching from debt instruments to equity instruments.
During the period, the KSE All Share Market Cap plummeted by Rs. 480.7 billion or 6.98%, as it logged in at Rs. 6.4 trillion down from Rs. 6.8 trillion.
Fertilizer Sector emerged as the clear cut winner as it contributed nearly 276 points to the index. On the other hand, Commercial Banks, Power Generation & Distribution Companies, Oil & Gas Exploration Companies, Cement Sector and Oil & Gas Marketing Companies emerged as the top losers, as they cumulatively snatched nearly 1,470 points from the index.
Within these underperforming sectors, BAHL, HUBC, OGDC, MEBL and PPL emerged as the blue chips that endured the maximum suffering as together, these companies lost over 659 points.
The domestic investors’ net trading resulted in a net selling of Rs. 3.7 billion during the quarter. Likewise, foreign corporates remained inclined towards a net purchasing as they invested Rs. 3.17 million during the period.
With the stock markets starting the month of October on a neutral note, it is likely that the key equity indexes would continue hold this stance in the upcoming days. However, attractive valuations on certain stocks may attract investors, which might lead to benchmark index assuming an upward trend.
On the international front, the market is expecting a positive upshot from Financial Action Task Force (FATF), which is due to announce its verdict on Pakistan’s status this month. While the media has been buzzing with all sorts of updates regarding FATF, the outcome which is highly likely is that Pakistan will prolong its stay in the grey list.
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