KARACHI: The Pakistan stock market gave investors a return of 15 per cent in the first half of the year 2016, outperforming Asian peers including Sri Lanka and Bangladesh that provided negative return of 10pc and 3pc.
The MSCI Pakistan Index with an upside of 10pc was also far ahead of the MSCI Frontier Market (FM) Index’s gain of 3pc. But almost all of the KSE-100 gain (14pc) accrued in the 2Q2016. In four months March-June, the KSE-100 index rose by 20pc.
The excitement was built in anticipation of Pakistan market reclassification from Frontier Markets to Emerging Markets by MSCI.
“The upgrade news which arrived on June15 was met with exhilarating response from investors as KSE-100 index gained 1,042 points (up 2.7pc) on June 15 and subsequently closed at an all-time high of 38,776 points on June 17”, says Saad Hashemy at Topline Securities.
During the half-year, foreign investors were net sellers of $41 million worth stocks. But keeping aside the one-time inflow of $70m from the sale of Engro Fertilizer shares, net outflow during 1H16 clocked in at a substantial high $111m.
Average daily traded value in cash market remained dry at was Rs9.0 billion for the six months against Rs11.4bn worth trading YoY.
“International oil prices have increased by 33pc (WTI at $49/barrel) during 1H2016. Given that bulk of locally listed stocks are commodity plays, an uptick in commodity prices will likely result in better performance of Pakistan Market. However, since imports are around twice of exports, a sustained rise in commodity prices can have negative implications for the country’s external accounts”, says Hashemy at Topline.
Pakistan market price-to-earnings (PE) multiple of 8.8 times is at 16pc discount from MSCI FM PE of 10.5 times. The analyst reckons that Pakistan’s potential inclusion in MSCI EM could be a key trigger that can take the local market’s PE close to MSCI EM PE of 14.4 times.
In the week ended Friday, the KSE-100 index added 394 points (1.05pc) to close at 37,784. The week started on a cautious note as investors continued to weigh the Brexit impact. However, recovery was seen later in the week after clarity on limited impact of Brexit on Pakistan’s economy and attractive valuations available in major sectors given market’s oversold condition. Average weekly volume fell 8pc to 143.0m shares, while average traded value fell 14pc to Rs8.2bn.
Foreigners were net sellers of $3.6m worth of shares during the week. Chemicals sector saw major outflow amounting to $5.6m, whereas Banks attracted net inflow of $4.1m.
According to KASB Securities, major gainers in the week were: Bata, Abbot, Pakistan Tobacco, Standard Chartered Bank and Service (Shoes) Industries, while Feroze1888, Rafhan Maize, Jubilee General Ins., Associated Services Limited, and Millat Tractors were the major losers. Of the key sectors, cements remained in the limelight as manufacturers increased cement prices by Rs35/bag to pass on the impact of budgetary measures.
Courtesy : Dawn News