Economy

KSE-100 in Aug’19, worst performing month of CY19

Karachi, September 2, 2019: The domestic equity bourse underwent a decline of 2,266 points in Aug’19, translating into a negative return of 7.1 percent and 5.5 percent in USD terms; this is the worst-performing month of CY19 taking CYTD return to -19.9 percent (USD based -29.1 percent).

Major reasons behind this subdued performance was heightened tension at the eastern border, news flow regarding a meeting of FATF’s regional subgroup Asia Pacific Group (APG) in Canberra and potential divestment of state owned companies by the government.

Market activity commenced on a negative note in Aug’19 in anticipation of weaker result season for cyclical sectors. Major wreckage came in the second week of Aug’19 when India revoked the special status of Kashmir which led towards heightened tension at the eastern border. Albeit, market showed strong recovery in the third week as enticing valuations uplifted the investor sentiment.

However, with a meeting of FATF’s regional subgroup APG concluding in Canberra, Australia, the local bourse felt some pressure as Pakistan was placed on enhanced monitoring. Index decline further gained momentum by news flow indicating divestment of state owned entities including OGDC, PPL and KAPCO by the government.

On the economic front, Current Account Deficit (CAD) during Jul’19 witnessed a decline of 73 percent YoY to USD 579 million from USD 2,130 million in Jul’18. During the month, downturn in CAD was witnessed due to 23 percent YoY (USD 1,466 million) decline in imports and 9 percent YoY (USD 216 million) YoY rise in exports. Trade deficit went down by 42.0 percent YoY to USD 2.3 billion compared with USD 4.0 billion in Jul’18.

Remittances by overseas Pakistanis registered an increase of 3 percent YoY to USD 2,039 million during Jul’19 compared to USD 1,982 million during Jul’18. The country wise data reveals that inflows from KSA, UK, UAE and USA amounted to USD 471 million (+8 percent YoY, +41 percent MoM), USD 299 million (0 percent YoY, +11 percent MoM), USD 427 million (-4 percent YoY, +20 percent MoM) and USD 332 million (+14 percent YoY, +20 percent MoM), respectively.

Foreign direct investment (FDI) during Jun’19 decreased by 58 percent YoY (-43 percent MoM) to USD 130 million vis-à-vis USD 310 million in Jun’18. During FY19, FDI displayed a decline of 50 percent YoY to USD 1,737 million. Latest data released by PBS suggests that large scale manufacturing (LSM) witnessed a decrease of 5.0 percent YoY in Jun’19.

This took FY19 LSM growth to -3.6 percent YoY over same period last year. Top three best performing sectors during FY19 were: Electronics (+0.44 percent YoY), Fertilizer (+0.38 percent YoY) and Leather Products (+0.03 percent YoY), official data disclosed. However, the highest weighted sector textile (weight: 21 percent) witnessed a decline of 0.05 percent YoY in FY19.

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