Daily Times

Pakistan Stock Exchange (PSX)consolidated its position in 2020, as benchmark Kse-100 with a year-on-year gain of 7%, managed to closed at 43,755.38 level, its highest year-end index closing in past four years.

During the year 2020, Pakistan’s stock market witnessed a tumultuous year, as the Covid-19 pandemic which has killed over 1.8 million people so far, sent nearly half of world’s population in some form of lockdown, halted economic activity, andsent shockwaves across the global stock markets-including Pakistan’s stock market which witnessed historic crash. PSX benchmark index opened the year on January 1stat 41,400 index level, but following the initial peak of the virus, the market crashed to touch its lowest index level for the year 2020, at 27,228.80, on April 25th.

However, the Pakistan stock market went on a recovery course, and recovered all of its losses incurred due to Covid-19 and its concomitant economic implications. The market not only witnessed Bull-run and defied experts’ projections, but also posted one of the best returns across the global markets. Adding achievements to its chest, the index also managed to make headlines across the world, after it was tagged the best performer in Asia and the fourth-best-performing stock market in the world by according to the report by New York-based global markets research firm,marketcurrentswealthnet.com, titled Denmark and Pakistan: the surprising stock markets that outperformed in 2020. According to the report “PSX benchmark KSE-100 index has given a return on investment of 38.5% in dollar terms as foreign capital has been flowing into the market after the yield on the nation’s bond fell below double digits,”.

The major triggers which lifted Pakistan’s stock market despite major odds were series of macro fiscal and monetary policy decisions. To inject stimulus into the Covid-19 hit economy, Pakistan’s central bank slashed policy interest rate to 7%, down from 625 basis points from a rate of 13.25%. Moreover, Government of Pakistan’s Rs1.2-trillion economic relief package to shield the economy from adverse effects of the coronavirus pandemic, also bolstered investor sentiment and encouraged them to make fresh investment. Among other series of triggers, International Monetary Fund’s emergency loan of $1.4 billion for Pakistan under its Rapid Financing Instrument and Government’s passage of budget for fiscal year 2020-21 also played an important role in lifting market sentiments.

According to the National Clearing Company of Pakistan Limited during the year, foreign investorsremained net sellers of worth $571.499 million worth of equities, while local investors remained net buyers. Among the local investors, the buying chart was led by Individuals with $232 million worth of equities followed by Insurance Companied with $229.89 million worth of equities and Companies with $110 million worth of equities. However the selling chart was led by Banks with $33.414 million worth of equities followed by Broker with $14.23 million worth of equities.

Among the best performing scripsat Kse-100 index during the year, TRG Pakistan Limited marked the highest percentage gain with 272%, followed by Pioneer Cement Limited with 239% gain, Systems limited with 237% gain, Kohat Cement Company Limited with183% gain and Cherat Cement Company Limited with 176% gain. However, during the year the worst performing scrips at the index was Hascol petroleum Limited with 45% price loss, followed by Sui North Gas pipeline Limited with 42% loss, Philip Morris (Pakistan) Limited with 42% loss and Shifa International Hospitals Limited with 40% loss.

Global Markets: Wall Street posts historic performance

Global stock markets also witnessed a year of turbulence, with Wall Street marking the most volatile year. Following the Covid-19 crisis, U.S stock markets touched the lowest point on March 23 amid widespread lockdowns due to the coronavirus pandemic: The S&P fell by up to 30%, the Nasdaq by up to 25% and the Dow Jones industrial average by as much as 34%. However, by the year closing the markets rallied to touch their historic highs with, with tech heavy Nasdaq Compositebeing the clear winner, which has gained 43%, while the 30-stock Dow is advanced 6.56% for the year, and the S&P 500 has gained 15.52% to date.

During the year, the major rally was brought by the technology stocks,which pushed the US stock market to record highs, and during its peak, US tech sector become more valuable than the entire European stock market for the first time in history. At its peak, much of the high powered valuation was concentrated in the top tech giants which included Microsoft and a basket of FAANG stocks; Facebook, Amazon, Apple, Netflix and Alphabet (formerly known as Google). Together the companies make up nearly 25% of the S&P 500 and were valued at roughly $7.5 trillion.

European markets also followed the trend at Wall Street, as by the year end the Stoxx 600 index closed down 3.8%, however it was up nearly 11% for the quarter. Among major regional indexes UK’s FTSE lost 14% year-to-date, marking its worst year since 2008.Meanwhile, the French CAC 40 declined 7%, German DAX advanced 3.5% and Italy’s FTSE MIB declined 5.4%. The worst-performing market in the region has been Spain’s IBEX, which stumped by 15% this year.

Asian shares also edged up on the last trading session of the year 2020, and ended a tumultuous 2020 at record highs, after growing investor hopes for a global economic recovery caused the dollar to fall further against most major currency. Chinese stocks rose to multi-year highs on the last trading day of 2020, as investors cheered a Sino-Europe investment deal and Beijing’s policy support for its capital markets.The blue-chip CSI300 index closed up 1.9%, at 5,211.29, the highest level since June 15, 2015 while the Shanghai Composite Index gained 1.7% to 3,473.07,it’s highest since Feb. 5, 2018. Among other regional markets, Japan’s Nikkei 225 also posted strong rally and touched a level not seen since August 1990, in the last week of the December 2020.

While the global markets attempted to touch record highs on the back of large unprecedented stimulus packages by the central banks and the governments, and strong rallies in tech sectors. However, it is yet to predict how in year 2021,which is set to bring forth new set of challenges for equity investors, the stock markets will react to supply chain crisis, looming inflationary pressure and heavy stock conversion owing to change in demand pattern.