Karachi, January 03, 2022 (PPI-OT): Pakistan Strategy: CY21 ends with a whimper – CY22 dependent on IMF

Friday finally brought down curtains on a disappointing CY21 where the index performance clearly fell short of the expectations, closing at 44,596 points level, returning ~3%on a YoY basis. For Dec’21 alone, the market returned -ve 1.1%MoM over uncertainty on tabling of “mini-budget” and SBP-amendment bill in order to revive the IMF program.

Strong corporate profitability growth during CY21 largely remained unappreciated in the market as the factors such as i) COVID-19 rebound, ii) commodity prices boom, iii) dormant IMF program and iv) interest rate hikes dented investor sentiments.

Average volumes throughout CY21 stood at 475mn shares, as opposed to 329mn shares over SPLY. Foreigners’ net sell stood at US$359mn during CY21, on top of CY20’s net sell of US$571.5mn. Consequently, the foreign ownership of PSX has contracted to 15% in CY21 as opposed to 20% in CY18.

Market direction going forward will be determined by GoP’s ability to strike a deal with IMF in order to revive the dormant US$6.0bn EFF program. Delay in revival of the same will keep the market performance jittery and we may see some selling pressure in the market. Volumes are also likely to remain low as the investors may adopt a wait-and-see approach.