Quarterly Review: KSE-100 leads the global capital markets by posting the highest return

October 6, 2020 (MLN): All may not have been going well for Pakistan in recent times, but the performance of stock markets, and KSE-100 in particular, turned the tables around for the country, as KSE-100 emerged as the best-performing equity market in the world.

Since March 2020, which is the time when the benchmark index was on its yearly low, the markets have recuperated by nearly 48%. However, it is important to note that the growth in the latest quarter is attributable to the first two months only, as in the third month the index lost about 539 points.

On the contrary, the index gained approximately 4,837 points during the month of June, i.e. 14.05% higher than the close of the previous month. This was considered to be the highest monthly return in the past 17 years. In July, the KSE-100 index posted a return of 1,852 points i.e. up by 4.72% as compared to the previous month.

As shown in the graph below (Data: Topline Securities), Pakistan led the global capital markets for the quarter, followed by Sri Lanka which posted a growth of 18%. Saudi Arabia and Denmark, both posted a return of 15% each, whereas South Korea, Finland, and Sweden recorded a growth of 14% each. On the other hand, Turkey emerged as the worst performer during the period as it suffered a decline of 16%.

Much of this recovery can be attributed to the ‘success’ of the government in controlling the outbreak of COVID-19, with the average number of cases hovering at around 650 per day, as opposed to the 5,500 per day in June.

Other factors that greatly helped in stimulating the economy include the highly aggressive measures taken by the State Bank of Pakistan, wherein it cut interest rates by 625 bps in order to boost business activities. This also resulted in an inflow of investment in the equity market, as opposed to the fixed income market.

The various stimulus packages announced by the Prime Minister, which includes the construction package and the PKR 1 trillion Karachi Transformation package, also helped in lifting the confidence of investors and pushing them to invest in the stocks of the companies that were deemed as the major beneficiaries.   

All in all, the KSE-100 index gained 6,149 points during the quarter ended September 30, 2020, and settled at 40,571 points i.e. a whopping 17.87% higher than the previous quarter’s close.

During the period under review, most of the points were brought in by Commercial Banks (+1,521), Cement (+977), Oil & Gas Marketing Companies (+425), Technology & Communication (+421), and Textile Composite (+322).

Company-wise, the scrips of HBL (+557), LUCK (+538), TRG (+248), POL (+205) and, PSO (+199) accounted for the most points gained during the quarter, while the shares of OGDC (-80), PSEL (-19), PMPK (-9), SHFA (-9), and JDWS (-6) turned out to be the most disappointing ones.

During the quarter, foreign investors observed net selling worth $94.72 million, with Foreign Corporates doing the maximum selling at $106.42 million. Overseas Pakistanis, however, bought securities having a worth of $12.41 million.

On the local front, a significant net buying of $108.3 million was observed amongst individual companies, followed by Mutual Funds and Insurance Companies Banks which bought securities worth $26.3 million and $20.55 million, respectively. On the other hand, Banks/DFIs sold securities worth $53.46 million.

The KSE All Share Market Cap improved by $7.23 billion, from $38.85 billion to $46.12 billion, demonstrating growth of 18.71%. Moreover, 91 companies ended their quarterly run in the green, whereas 9 ended up in the red district.

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