Economic Survey: KSE 100-Index up 45% in post-election rally

Companies listed on Pakistan’s largest bourse receive robust foreign interest and post healthy earnings growth.

KARACHI: The Karachi Stock Exchange (KSE) 100-Index increased 45.2% in the post-election rally to reach 28,913 points by the end of April, according to the Economic Survey of Pakistan released on Monday.

Arguably, the Pakistan Muslim League-Nawaz (PML-N) managed to live up to its reputation of a business-friendly party, as companies listed on Pakistan’s largest bourse received robust foreign interest and posted healthy earnings growth amid a significant improvement in business sentiments during 2013-14.

Strong fundamentals underlying the stock market’s continued bull run notwithstanding, the survey noted that the ‘investor moratorium’ imposed in January last year also played a key role in propelling the benchmark index to new heights. The investor moratorium, which technically expired on February 28, allowed foreign investors to bring investments to Pakistan with no questions asked about the money’s origin and sources.

While addressing the media on Monday, Finance Minister Ishaq Dar took pride in the fact that treasury bills are now traded on the stock exchanges, which will encourage retail and international fixed income funds to invest in government securities. This will increase liquidity and end the monopoly of ‘primary dealers’ – a handful of banks and financial institutions that have traditionally dominated the trade of government papers in Pakistan.



Debt market

As for the debt market that provides the corporate sector with the opportunity to raise funds from non-banking sources, Pakistan performed relatively poorly in the outgoing fiscal year. Only two issues of listed debt instruments were offered to the general public. These included the issue of Rs4 billion term finance certificates (TFCs) – commonly referred to as bonds – by Pakistan Refinery and the offering of Rs6 billion Sukuk (Shariah-compliant debt instrument) by K-Electric.

Separately, a total of 11 debt securities were issued through private placement in July-March.

Mutual funds and NSS

Total assets under the management of 157 mutual stood at Rs452.3 billion on March 31 as opposed to Rs417.8 billion on December 31, showing a quarterly increase of 8.2% over the three-month period, the survey said.

Net investment in the 14 National Savings Schemes (NSS) run by the Central Directorate of National Savings in July-March remained 149.2 billion, which is notably less than the investment the NSS received in the last fiscal year (Rs386 billion).

Many economists believe the drop in the NSS investments is a positive development. Unlike mutual funds that promote savings and increase investment through money and equity markets, NSS investments only bolster fiscal deficit by meeting government’s borrowing needs.