The benchmark KSE-100 recorded its highest return of 38% since FY14 in PKR terms and highest return of 47% since FY04 in USD term
ISLAMABAD
In financial year 2020-21, Pakistan Stock Exchange 100-index has set a precedent of growth despite coronavirus and other challenges. There are many years that investors easily forget, but FY21 certainly will not be among them as the benchmark KSE-100 recorded its highest return of 38% since FY14 in PKR terms and highest return of 47% since FY04 in USD term (a 17-year high). This is the first time since FY14 that USD-based returns have been higher than PKR returns.
In other words, the benchmark index gained remarkably 12,934 points during FY21 and closed at 47,356 points, marking the highest ever June-end closing level. The economic revival gets much of the credit for the market’s gains or aiding bullish climate at the index, although the market sentiment was tested several times during the year, including political unrest witnessed amid alliance of opposition parties under the banner of Pakistan Democratic Movement in the lead up to the Senate Elections in March’21, and re-emergence of COVID waves-II in Oct’20 and waves-III in Feb’21.
According to an analytical report of Mettis Global, a Karachi-based FinTech entity, reviewing the year-long pattern shows that a significant cut in the benchmark policy rate by 625 bps to 7% at the beginning of the year, and the growth-prone budget for FY22 presented at the end of FY21, has significantly improved the market debt. Moreover, lower yields on fixed-income instruments rendered equities as the preferred asset class this year.
During last 6-12 month, the uptick in equity prices has been witnessed driven by an increase in liquidity as government and Central Bank’s efforts to stimulate the economy during the COVID-19 outbreak has resulted in greater participation by the retail segment, resulting in an overall increase in turnover at the bourse.
Bullish spree further aided by robust corporate profits, along with strong participation of local investors in IPOs as companies have raised highest ever amount of Rs17.1bn during FY21 through IPO with a total number of new listings of 7 at PSX, which is high of 11 years.
This shows that investors remained active during FY21, as a consequence of which average Daily Turnover (ADTO) has notably improved by around 164% YoY to Rs19.0bn, at a high of 13 year with an improvement in volumes by around 168% YoY to nearly 524mn shares in FY21. However, improved volumes came with a significant drop in settlement to 53.2% in FY21, down 689 bps YoY.