Outgoing fiscal year: Healthy year for the KSE
Economic, energy reforms help stock market experience one of the best years in history.
KARACHI:
Pakistan stock market posted a return of 41% in 2013-14, proving the outgoing fiscal year as one of the best years in the country’s history.
The benchmark KSE-100 Index gained 8,647 points in 2013-14, which translates into growth of 42% in dollar terms, according to a research note by Topline Securities.
“Fuelled by newly-elected investor-friendly government, economic and energy sector reforms, both local and foreign investors participated in the Pakistani stock markets in large numbers. The return of 41% compares favourably with the last 10-years and 20-year average annual returns of 21%,” said Topline Securities Research Analyst Vahaj Ahmed.
MSCI Pakistan gained 23% as opposed to 31% gains of MSCI Frontier Markets (MSCI-FM) and 16% gain of MSCI FM-Asia in 2013-14. Moreover, amongst Asian frontier markets categorised by MSCI, Pakistan ranks first, outpacing Bangladesh (21%), Vietnam (13%) and Sri Lanka (-1%).
Analysts believe the positive sentiment was driven by the election of business-friendly Pakistan Muslim League-Nawaz in May 2013 that had a clear objective of reviving the economy through energy sector reforms and incentivizing businesses – something in sharp contrast with the Pakistan Peoples Party’s pro-agriculture policies.
Pakistan’s GDP grew 4.1% in 2013-14 while 4.5% growth in large-scale manufacturing (LSM) helped the manufacturing sector grow by 5.6%. “Historically, there has been a positive correlation between LSM and KSE performance, as most of the listed companies represent the manufacturing sector,” Ahmed said.
The situation on the external account front also improved substantially in the last fiscal year. Pakistan’s external account posted a surplus of $3.3 billion in the first 11 months of 2013-14, which led to the country’s foreign exchange reserves crossing $14 billion-mark. The Pakistani rupee strengthened 6% against the dollar in the first half of 2014.
Besides good news on the political and external account fronts, another major impetus to the market came from higher foreign inflows. Ahmed says foreign investors, who hold $5.7 billion worth of Pakistani shares comprising 33% of the market free-float and 8% of the market capitalisation, remained net buyers in 2013-14.
Foreigners bought shares worth $2.1 billion and sold $1.8 billion, resulting in a net inflow of $248 million in the last fiscal year. Net foreign inflows stood at $261 million in the first half of 2014 compared to $411 million in the corresponding period of the last year.
Published in The Express Tribune, July 1st, 2014.
Pakistan stock market posted a return of 41% in 2013-14, proving the outgoing fiscal year as one of the best years in the country’s history.
The benchmark KSE-100 Index gained 8,647 points in 2013-14, which translates into growth of 42% in dollar terms, according to a research note by Topline Securities.
“Fuelled by newly-elected investor-friendly government, economic and energy sector reforms, both local and foreign investors participated in the Pakistani stock markets in large numbers. The return of 41% compares favourably with the last 10-years and 20-year average annual returns of 21%,” said Topline Securities Research Analyst Vahaj Ahmed.
MSCI Pakistan gained 23% as opposed to 31% gains of MSCI Frontier Markets (MSCI-FM) and 16% gain of MSCI FM-Asia in 2013-14. Moreover, amongst Asian frontier markets categorised by MSCI, Pakistan ranks first, outpacing Bangladesh (21%), Vietnam (13%) and Sri Lanka (-1%).
Analysts believe the positive sentiment was driven by the election of business-friendly Pakistan Muslim League-Nawaz in May 2013 that had a clear objective of reviving the economy through energy sector reforms and incentivizing businesses – something in sharp contrast with the Pakistan Peoples Party’s pro-agriculture policies.
Pakistan’s GDP grew 4.1% in 2013-14 while 4.5% growth in large-scale manufacturing (LSM) helped the manufacturing sector grow by 5.6%. “Historically, there has been a positive correlation between LSM and KSE performance, as most of the listed companies represent the manufacturing sector,” Ahmed said.
The situation on the external account front also improved substantially in the last fiscal year. Pakistan’s external account posted a surplus of $3.3 billion in the first 11 months of 2013-14, which led to the country’s foreign exchange reserves crossing $14 billion-mark. The Pakistani rupee strengthened 6% against the dollar in the first half of 2014.
Besides good news on the political and external account fronts, another major impetus to the market came from higher foreign inflows. Ahmed says foreign investors, who hold $5.7 billion worth of Pakistani shares comprising 33% of the market free-float and 8% of the market capitalisation, remained net buyers in 2013-14.
Foreigners bought shares worth $2.1 billion and sold $1.8 billion, resulting in a net inflow of $248 million in the last fiscal year. Net foreign inflows stood at $261 million in the first half of 2014 compared to $411 million in the corresponding period of the last year.
Published in The Express Tribune, July 1st, 2014.