PSX provided 46pc return in 2016
KARACHI: At the close of the last session of the year 2016 on Friday, the Pakistan Stock Exchange (PSX) was calculated to have provided total return of 46 per cent for the year, which put Pakistan in the spotlight as the best performing market in Asia and the fifth best among the world markets.
The PSX return of 46pc also stood out as the best in MSCI Frontier Markets and compared favourably with the PSX average gains of 20pc over the past 10 years and average return of 24pc over the last 20 years.
According to brokerage Topline Securities strong performance of equities was mainly led by ample local cash liquidity on account of falling interest rate and rising investor confidence. “Other factors that went on to help in generating a higher than average gains in stocks included economic recovery (Pakistan economy grew by 4.7pc in FY16 compared to last three-year average growth of 3.9pc) which positively affected local demand for various sectors; rebound in oil prices, better security situation and exuberance on Pakistan’s reclassification in MSCI EM Index”.
While the average volumes at the local bourse increased by 14pc to 281m shares in 2016, the average trading value was up only 2pc to Rs11.6bn, as small-cap stocks remained in the limelight for most part of the year.
Among top 30 stocks in terms of market capitalisation, Pakistan Oil Fields, The Searle Company and Mari Petroleum remained top performers posting gains of 112pc, 106pc, and 98pc, respectively, in 2016. Automobiles and cements also remained best performing sectors in the outgoing year, posting gains of 73pc and 66pc.
Index-heavyweight oil and gas exploration sector was up 52pc whereas banks provided 33pc return. On the flip side, fertiliser sector was down 5pc due to weak demand and high inventory levels.
The only disturbing aspect for investors during 2016 was that while the local funds bought $300 million and non-bank firms $225m worth of equity, foreign investors stood out as net sellers of $350m worth equity. It was higher than 2015 net outflow of $315m. Much of the foreign sell-off was seen in oil and gas exploration and fertiliser and commercial banks. However, it was absorbed by mutual funds and NBFC, which were net buyers of $300m and $225m.
Moreover, regardless of booming market, there was absence of government divestment of equities in state-owned enterprises and the PSX witnessed just three private sector initial public offerings which raised Rs4.2bn.
Published in Dawn, December 31st, 2016