During the financial year 2017-18, the performance of stock markets presented a mixed trend between July and December; however, the PSX-100 index resumed its momentum from the start of January 2018.
There are many factors which brought a swing in emotions of the investors, which in turn changed the pace of their buying/selling activity.
During the period under review, the market remained volatile. Until August 2017 it was rising, reaching its peak on August 03 2017, then continued to go down, reaching its lowest closing point of 37,919 on December 19 2017. The behavior might apparently be linked to a few days before the devaluaion of Pakistani Rupee.
The fiscal year 2018 started well with significant positive economic indicators, notably, a promising GDP growth, improved country perception, recognition of SMEs as the prime mover of country’s economy and the continuity of the inflow of remittances by the Overseas Pakistanis.
At the start of new calendar year 2018, the market gained momentum. On March 30th, PSX 100 index closed at 45,560.30 points whereas market capitalization was Rs. 9,370.6 billion.
The foreign investors offloaded securities worth USD 12.9 million during July 2017 – March 2018, which was absorbed by domestic individual investors, companies and insurance companies. This strong buying by local investors has shown the confidence of the investors in Pakistan’s equity market.
Pakistan has entered a new era of equity trading; however, the performance of Pakistan’s Capital Market will depend on domestic and international economic conditions in the future.
Capital markets play a pivotal role in mobilizing domestic resources and raising national productivity. The level of capital market development is an important determinant of the level of savings, efficiency of investment and, ultimately, the rate of economic growth.
During the previous year, Pakistan’s capital market remained narrow due to a non-conducive economic environment and political uncertainty but as the security situation improved with political clarity, investors regained their confidence and the capital market started showing positive performance.
During the current government’s regime, significant developments in the capital market and corporate sector were seen.
Consequently, the revival of investors’ confidence was displayed via better returns on investment in the Karachi stock market.
The market continued its upward trend, reaching an all time high. KSE 100 witnessed its highest level of 52,876.46 on May 24, 2017.
Important Historical Events
Demutualization of The Stock Exchanges
Consequent to the promulgation of the Stock Exchanges (Corporatization, Demutualization and Integration) Act 2012, the stock exchanges were successfully corporatized and demutualized on August 27, 2012.
Integration of Stock Exchanges
The three stock exchanges, i.e. Karachi Stock Exchange, Lahore Stock Exchange and Islamabad Stock Exchange were integrated into a single unified national level trading platform under the name of Pakistan Stock Exchange Limited (PSX).
PSX became operational from Jan 11 2016. Integration of stock exchanges has provided numerous benefits in terms of reducing fragmentation, increasing efficiency and improving governance standards.
Divestment of PSX Shares to Strategic Investors
The deal for the strategic sale of 40% of PSX shares to an anchor investor consortium, comprising leading Chinese exchanges and Pakistani financial institutions, was completed by Dec 23, 2016.
Sale of 20% of PSX’s Stake and Self-listing of Pakistan Stock Exchange (PSX)
Public subscription of 20% shares of PSX was successfully completed, subsequent to completion of divestment process mentioned above.
Up-gradation of Pakistan to Morgan Stanley Capital International (MSCI) Emerging Markets Index
Based on the country’s improved macroeconomic indicators, Pakistan was upgraded from MSCI’s Frontier Markets to Emerging Markets in May 2017.
Since January 11 2016, the exchanges at Karachi, Lahore and Islamabad were merged into Pakistan Stock Exchange (PSX), which is now providing a single platform to investors, particularly the foreign investors.
Leading Global Stock Market Trend
Pakistan Stock Exchange (PSX) was ranked 5th best performing market in the world in 2016.
The following figure shows the performance of international stock markets for period July 2017 to April 2018.