Rs 857 Billion Wiped Off Pakistan’s Stock Market in FY 17-18

The milestone of consecutive bull run for eight years for Pakistan’s stock exchange finally ended, as the PSX index posted a negative return of 10% in the financial year 2017-18 (22% in USD terms). This translated to roughly Rs. 857 billion of value being wiped off the stock exchange.

The deteriorating economic situation, political unrest before general elections and continued sell-off by global funds in emerging markets led to the dismal performance of the Pakistani bourse, which was once considered to be a blue-eyed market for offshore investors.

2018: The Worst Year For Stock Market In 17 years

According to a report by Sherman Research, the financial year 2018 turned out to be the worst year for Pakistan both in terms of index performance, as well as market activity. Sadly, PSX index plummeted by 22% in US$ terms, posting its worst performance in seventeen years (FY02-FY18).

This is barring FY09 when Pakistan market remained closed for several months and plunged 51% in US$. Just to recall, Pakistan benchmark Index posted average annual return of 11% in US$, during last ten years. The performance was far better during last twenty years, as average annual return during this period stood an impressive 21% in US$.

During FY18, average 84 million shares a day ($57 million) were traded at KSE-100 index, compared to 138 million shares ($105 million) in FY17. This was the lowest trading activity since FY11.

Foreigners Remained Net Sellers For a Third Consecutive Year

With record Pak Rupee devaluation of 16% in FY18, concern still remains amongst foreigners regarding future dollar returns. These concerns are aggravating at a time when Pakistan is facing external account weakness and the general election are around the corner. Besides Pakistan, foreigners remained sellers in emerging markets during last twelve months.

Thus, FY18 is third year in a row that offshore investors remained net sellers on an annual basis in Pakistan market. Excluding June 29th foreign flows, foreigners in FY18 bought $2.6 billion value of stocks, while, sold $2.9 billion worth of stocks, resulting in the net selling of $282 million. Last year offshore investors were net sellers of $630 million.

Major selling was observed in Commercial Banks sold out shares valuing $155 million, followed by Oil & Gas exploration with $99 million and Cement with $35million.

Foreign selling remains the major risk for the market, until new government reign-in which will chalk out clear roadmap to bring back economic stability.

PSX—The Worst performer in MSCI Emerging Market

Amongst the twenty-five MSCI emerging markets, Pakistan was the worst performer during last twelve months. According to MSCI, Pakistan posted negative return of 33%, followed by Turkey and Philippines posting negative return of 29% and 16%, respectively. Peru and Russia remained the best performers by posting positive returns of 25% and 17% respectively.

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