Karachi, July 01, 2021 (PPI-OT): FY21 – a year to remember

The KSE100 posted stellar performance during FY21, gaining nearly 38% during the year. In terms of US$, the market performance was even better in US$ terms where the KSE100 gained 47% during the year. We highlight that this is the first time since FY14 US$-based returns have been higher than PKR returns.

While it may seem counterintuitive, some credit for this phenomenal performance is owed to the pandemic; had it not been for COVID-19, we may not have seen such a drastic drop in the policy rate and the rapid deployment of fiscal and monetary support. In fact, the SBP has itself gone as far as to attribute some of the Remittance flows to the travel restrictions imposed during the pandemic.

Nevertheless, investors remained surprisingly active during FY21 as average daily traded volumes reached 527mn shares (171% higher than the decade average of 194mn) while Average value traded per day was recorded at US$120mn for the year, 61% higher than the decade average of US$75mn.

From a flows perspective, we find that individuals have been the largest net buyers of US$332mn followed by US$138mn worth of buying exhibited by Companies. Conversely, foreigners have continued on their selling spree, offloading US$387mn worth of equities during the year.

The equity market is expected to remain range-bound in the coming months on looming economic concerns – the elephant in the room being rising oil prices and the monumental Petroleum Development Levy target for FY22 that could push up domestic fuel prices and eventually reflect in the CPI. And printing of currency could further exacerbate the situation. With the SBP keeping the medium-term inflation targets intact, one cannot rule out the possibility of a monetary policy hike in the coming months.