PSX: 2022 expected to bring a positive change

ISLAMABAD: It is expected that this new year 2022 will bring a positive change in PSX and it will remain on a positive note as aggregate earnings reach an all-time high in a decade in 2021.
Investors believe that this year’s earnings will also increase as against last year, according to WealthPK
The beginning of 2021 was a watershed moment for the stock market. On the strength of reopening global economies and a V-shaped rebound domestically, the index saw a tremendous climb, resulting in all-time high profitability for listed firms and a decrease in the Covid-19 infection ratio, .
The successful implementation of vaccines was critical in recovering public opinion. On the macroeconomic front, the current account remained in surplus in the early half of the year, accompanied by depreciation of the Pakistani rupee against the US dollar, a significant development in the LSM, and an increase in the GDP growth rate, all of which led to a shift in the momentum.
However, political turbulence combined with red macroeconomic indices shifted the mood.
The market has been under strain due to pressure on the external account, increasing inflationary readings, repeating rounds of Covid-19, IMF approval delays, and the move from Emerging Market to Frontier Market.
Furthermore, foreign exchange reserves began to dwindle, and the Pakistani rupee began to weaken against the US dollar.
The State Bank, on the other hand, made a policy change, beginning monetary tightening to preserve sustainable growth and avoid a repeat of previous boom-and-bust cycles.
Despite these uncertainties, the stock market is performing well, with aggregate earnings after tax of businesses in the KSE 100 Index reaching Rs258 billion in the third quarter of 2021 – the highest in the past ten years. The index has closed the year 2021 on 44,596 points, generating a return of 1.9%, WealthPK reported.
According to Arif Habib Limited report, compared to the previous year, trade volume climbed by 44%. Technology, refinery, food, banks, and cement were the most active industries throughout the time, with average volumes of 130 million, 39 million, 35 million, 34 million, and 28 million, respectively.
On a scrip-by-scrip basis, World Call Telecom Limited led with 53 million shares, Cnergyico Pakistan Limited with 23 million, and HUM Network Limited with 18 million.
Systems Limited, Gul Ahmed Textile Limited, and Meezan Bank Limited were the top gainers for the year, with gains of 101 percent, 57 percent, and 56 percent, respectively. Azgard Nine Limited, Pak Elektron Limited, and Pakistan International Bulk Terminal, on the other hand, were the losers with the worst results of 54 percent, 44 percent, and 43 percent respectively.
In terms of sectors, the technology sector outperformed the rest, completing the year with a 57 percent gain, followed by textile weaving 35 percent and synthetic 35 percent.
However, cable and electrical goods had negative returns of 44 percent, transportation 43 percent, and mutual funds 43 percent.
Technology & communication led the index contributors with 1,003 points, followed by commercial Banks (921 points), fertilizer (336 points), and miscellaneous (273 points).
Cement, with 373 points, Oil and Gas Marketing Companies, with 347 points, and refinery, with 337 points, all contributed to the negative index.
Meanwhile, Systems Limited (778 points) led scrip-level upside contributions, followed by Meezan Bank (465 points) based on robust deposit growth and stronger profitability, and Engro Fertilizers (409 points) on the back of higher profitability amid improved urea offtake and better margins. National Refinery Limited (-189 points) due to delay in the refinery policy, D.G. Khan Cement Company Limited (-164 points) due to high coal prices, and Oil & Gas Development Company Limited (-159 points) due to overseas selling were all negative contributions.
Foreign selling is encouraged by macroeconomic uncertainty and currency pressure. Despite the current government’s efficient approach for dealing with the domestic Covid-19 and the economy’s subsequent swift rebound, foreigners remained net sellers in CY21, with net outflows of USD 359 million compared to USD 455 million in CY20. In particular, the move from MSCI Emerging Market to Frontier Market resulted in the bulk of outflows at the local market in November 2021, with heavy selling in blue-chip companies. Although higher-than-expected GDP growth and double-digit increases in earnings were expected to boost market sentiment, these macroeconomic developments were overshadowed by persistent exchange rate pressure and a widening trade deficit gap, dampening foreigners’ sentiments and leading to net selling. Meanwhile, limited inflows from Frontier Market were unable to reverse the yearly tally, dampening morale, WealthPK reported. – INP