KSE-100 posts 10% return in year 2019

KSE-100 posts 10% return in year 2019

KARACHI: The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) posted a return of 10 percent during year 2019.

Analysts at Arif Habib Limited said that KSE-100 index posted a return of 9.9 percent YoY during CY19 while USD-based return clocked-in at negative 1.4 percent.

First positive return after two years of consecutive negative returns, the analysts said.

Barring the last couple of months, CY19 was nothing short of a horror story for the equity market with a dominating bearish trend. During the year, the KSE-100 index crashed to a 5-Yr low of 28,765 points on August 16, 201919, which was a 22 percent contraction since December 2018 and a 31 percent decline on a YoY basis.

Stringent conditions attached with the USD 6 billion IMF bailout package such as 40 percent higher FBR tax revenue target, currency depreciation, cap on sovereign guarantees, electricity and gas tariff hikes were the sources of pessimism during the outgoing year.

Meanwhile, tension on the border with India following the air combat in Feb’19 had its own adverse effects on the overall sentiment.

Albeit, the domestic equity bourse showed a sharp inflection post its low in August 2019.

Till date, since its low the market has shown a remarkable rebound of 42 percent, and in effect turning the CY return positive.

Undoubtedly, dirt cheap valuations across the index and over-selling were pivotal factors for the impressive market performance but we see the economy entering into stabilization mode as a more sustainable and important reason.

Analysts at Topline Securities said that KSE-100 index during 4Q2019 recorded growth of 8,656 points/27 percent; which is the highest quarterly gain achieved by index since 3QCY09 to close at level of 40,735.

The recovery in equities was mainly led by improved macroeconomic factors which included 1) declining bond yields leading investors towards equities, 2) stable PKR/USD exchange rate, 3) Positive first quarterly review by IMF, 4) foreign investment in local debt securities, 5) anticipation of policy rate cut in 1H2020 & 6) current account surplus of USD70 million recorded in month of October.

Political uncertainty as always remained a key concern during the quarter. Departure of ex-prime minister Nawaz Sharif to London, conditional extension to COAS for 6 months by supreme court and decision of death penalty to ex president Musharraf by special court were the main highlights.

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