KARACHI: Pakistan Stock Exchange (PSX) is one of the worst-performing markets in the third quarter of 2021, according to analysts.
Pakistan was one of the worst-performing markets in 3Q2021 (as per Bloomberg). Brazil (-19 per cent) and Hong Kong (-15 per cent) were the only other markets that performed poorly than Pakistan.
The leading markets were Zambia (+46 per cent) and Mongolia (+28 per cent). These are total returns in USD terms. MSCI EM was also down 9 per cent while MSCI FM increased by 2 per cent during 3Q2021. MSCI Pakistan recorded a decline of 19 per cent.
The analysts at Topline Securities on Friday said that Pakistan’s benchmark KSE-100 index has registered a decline of 5 per cent in Pak Rupee (PKR) terms and 12 per cent in USD terms in the third quarter of 2021, after delivering consecutive gains during the preceding five quarters (average/quarter: 10 per cent in PKR terms and 12 per cent in USD terms).
Almost all the losses during the quarter were witnessed in the last two weeks, where the KSE-100 dropped 2,371 points (-5 per cent) in last 13 trading sessions.
It brings down KSE-100’s recovery from its low on March 25, 2020 to 65 per cent and gains in 2021 year to date to 3 per cent. KSE-100 is now 15 per cent from its peak seen in 2017 in PKR terms, however, market capitalization is down 54 per cent in US$ terms (from US$99.6 billion to US$45.7 billion).
Concerns at the local bourse stemmed from higher-than-expected Current Account Deficit due to increasing domestic demand and rising international commodity prices. This is also reflected in PKR/USD parity, which deteriorated by 8 per cent in 3Q2021.
In response, the Central Bank increased the Policy Rate by 0.25 per cent to 7.25 per cent and also have taken host of other measures to curb domestic demand. The federal government has spoken about increasing tariffs to slowdown the demand growth.
During the quarter, MSCI also decided to downgrade Pakistan from Emerging Market (EM) to Frontier Market (FM).