KARACHI: Pakistan stocks has exhibited a dismal performance during the year 2022 due to political and economic crisis.
Analysts at Topline Securities Limited said that economic and political issues badly affected local bourse in 2022.
As a result Pakistan Stock Exchange (PSX) benchmark KSE Index fell 9 per cent in 2022. With Pakistani Rupee (PKR) falling 22 per cent against the US dollar, the Index was down 29 per cent in dollar terms.
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They said it was also turbulent year for global stock markets as $18 trillion were wiped out in 2022 with drop of approximate 20 per cent in MSCI World Index which is worst performance since the 2008 crisis. MSCI EM fell 22 per cent while MSCI FM was down 29 per cent in 2022.
As per Bloomberg data, Pakistan’s KSE-100 Index was amongst worst performing market in US dollar term in 2022.
Due to macroeconomic issues, activity at PSX also remained dull. Average traded volume (ready/cash) per day at PSX was down 52 per cent to 230 million shares/day.
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Similarly, average traded value per day was down 59 per cent to Rs7 billion/day which was lowest since 2019. In futures market, total traded volume and value per day were also down by 33 per cent and 56 per cent to 94 million and Rs3.6 billion, respectively.
KSE Index also underperformed other asset classes in 2022 including Gold (+45 per cent), 1-year US$ Naya Pakistan Certificate (+36 per cent) and US Dollar (+28 per cent). T-Bills, Money Market Fund and Property indices posted returns in the range of 12-14 per cent in 2022.
IPO market was also impacted due to falling equity values as only 3 Initial Offerings/IPOs came to raise funds in 2022 as against 8 IPOs in 2021. The number of IPOs are also lowest after 2019 when Pakistan saw just 1 IPO at PSX.
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Foreign corporate selling continued in 2022 with net selling of $127 million. In last 7-years, foreign corporates have sold shares worth of $2.5 billion at PSX.
Local mutual funds and insurance companies also trimmed their position in 2022 where mutual funds sold $166 million while insurance companies sold $128 million in 2022.
Selling was absorbed by local Individuals, Banks and Companies with net buying of $138 million, $117 million, and $78 million, respectively in 2022.
While nervousness ruled almost all asset classes in 2022: stock market, bond yields, and the currency, we believe that for the past few years, the KSE-100 index returns have not caught up with valuations.
There has been an understandable lack of conviction in CY22 as investor’s awaited clarity.
The equity bourse posted an exceptionally dismal performance during CY22, eroding positive returns realized by the market in the past three years, to close at 40,420 points (down by 4,172 points, -9.4 per cent YoY).
In USD terms, the return was even more disappointing (-29.3 per cent YoY) given the relentless pressure on the Pak Rupee in the outgoing year.
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Having said that, we find it pertinent to highlight that despite the year being relatively disappointing for equity market investors, PSX fared much better in terms of local currency return compared to other international markets.
Panic was observed in most stock indexes, which suffered greatly amid uncertainty in the global economic climate stemming from stringent monetary tightening to combat high inflationary readings post commodities’ spikes.
Without price stability, and stable growth in the labour market, slowdown in aggregate demand compounded fears of an imminent recession in the US and Europe.
Whereas a dire geo-political scenario, bearing in mind the Russia-Ukraine war and China-Taiwan conflict, further eroded the sentiment.
While global investors sided with caution, market participants of the domestic bourse also took account of the political impasse in Pakistan, which began well before the ex-Premier was removed by a vote of no confidence.
Moreover, a spectrum of economic issues triggered by another external account crisis and an ongoing bout of high CPI, which despite multiple policy rate hikes during the year, also overshadowed any positive news.
Some temporary spikes were seen particularly as the landmark agreement of the Reko Dig was reached between the Federal and Baluchistan government with Barrick Gold Corporation, and Pakistan made an exit from the FATF Grey List in October 2022 after a 4-year stint.