The government has anticipated that the Pakistan Stock Exchange (PSX) will maintain its current growth trajectory in the next fiscal year starting July 1, 2021.
Refinery, technology and communication, engineering, glass and ceramics, and cement sectors led the rally during outgoing fiscal year 2021.
The all-time high volumes of 2.21 billion shares recorded in May and increase in the number of new companies making their shares available for trade at the PSX suggest the appetite for investment in share market is on the rise, according to the Economic Survey 2020-21.
“Pakistan Stock Exchange has emerged as the best performing market in Asia and fourth best performing market in the world,” Finance Minister Shaukat Tarin said after unveiling the Economic Survey on Thursday.
After a volatile ride in FY20, the stock and debt markets bounced back in FY21 and “the benchmark KSE-100 index appears set to rise in FY22,” the survey projected.
The KSE-100 index recovered by 40% (or 13,830 points) over the last 11-month period and it closed at 48,251.49 points on Thursday compared to 34,422 points on the last trading day of previous fiscal year – June 30, 2020.
The increase in the KSE-100 index was driven by the government’s large stimulus package, central bank’s policy rate cut, strong growth in large-scale manufacturing sector, improvement in external accounts and reforms introduced by the Securities and Exchange Commission of Pakistan (SECP) and PSX in the wake of Covid-19.
“Demand for stocks of technology and communication sector spurred during the pandemic. Work-from-home model accelerated digital revolution. In addition, the listing of TPL Trakker also increased the market capitalisation of technology and communication sector,” the survey report mentioned.
“Prime minister’s construction package has clearly boosted demand for engineering and cement sectors. The share price of Lucky Cement has jumped by 70% since July 1, 2020. The engineering sector witnessed an IPO this year of Agha Steel Industries that may have contributed to its growth.”
Despite the Covid-19 outbreak, the PSX witnessed five initial public offerings (IPOs) during July-March FY21. In 2020, four IPOs took place, which was the highest number in the last five years.
“Investor’s appetite was so strong that most of these issues were oversubscribed,” the survey added.
“More IPOs are waiting in the queue. Though the third wave of Covid-19 dragged the KSE-100 index down in March and April of FY21, reforms introduced by the SECP and government’s robust policies will not only help the capital market to withstand the pressure but also remain bullish,” it said.
The average daily shares volume has been higher this year compared to the previous year, suggesting that more buyers and sellers are in the market, which makes it easier and faster to execute trade.
“On May 27, 2021, PSX witnessed an all-time high daily trading volume with 2.21 billion shares traded in a single session.”
During July-March FY21, the market capitalisation of PSX increased by 20.9%. It stood at Rs7,718 billion with total number of listed companies at 532 as of April 30, 2021.
The top five sectors, which saw their market capitalisation increase in the range of 63-172%, included cement, engineering, glass and ceramics, refinery, and technology and communication.
Top five companies in terms of their market capitalisation were Oil and Gas Development Company Limited (OGDCL), Pakistan Tobacco, Nestle Pakistan, Lucky Cement and Pakistan Petroleum Limited (PPL).
“Out of these five major companies at the PSX, however, only Lucky Cement price has registered a positive growth. Fall in share price of Pakistan Tobacco partly explains the negative growth in the tobacco industry. Share prices of OGDCL and PPL have dropped as oil and gas exploration companies posted a modest 1.8% growth.”
Published in The Express Tribune, June 11h, 2021.