Zubair Yaqoob
Karachi
During Oct’19, the equity market recorded consecutive 2nd month increase as the index jumped up by 2,125 points, portraying a return of 6.6% MoM (USD based return of 7.1% MoM). With this, CY19TD and FY20TD return clocked-in at -7.7% (USD -17.7%) and -0.9% (USD +3.7%), respectively.
The reasons behind the impressive performance of the bourse were: 1) Signs of recovery in the economy with declining Current Account Deficit along with stability in the currency, 2) Pakistan avoiding blacklisting by the FATF, and 3) Continuous decline in fixed income yields indicating chances of a rate cut in the foreseeable future. Market activity commenced on a positive note as businessmen meeting with Army Chief along with government’s economic team boosted investor confidence. Moreover, 90% tax collection of the IMF target also encouraged investor sentiment.
Additionally, Pakistan got further extension till Feb’20 from FATF regarding implementation of Anti Money Laundering regulations and improving counter terrorist financing operations. Until then the country will remain on grey list. In addition, PIB yields in the secondary market also depicted a decline of 237bps, 251bps and 256bps for 3, 5 and 10 years respectively from Jul’19. On the economic front, current account deficit (CAD) has witnessed a decline of 80% YoY to USD 259mn for the month of Sep’19 compared with USD 1,278mn during Sep’18. During the month, downturn in CAD was witnessed due to 17% decline in total imports to USD 3,915mn.
However total exports and remittances went up by 4% YoY to USD 2,315mn and 18% YoY to USD 1,748mn, respectively. Trade deficit went down by 37% YoY to USD 1.6bn compared with USD 2.5bn during Sep’18. During 1QFY20, CAD went down by 64% YoY to USD 1,548mn. Again, thanks to trade deficit which went down by 34% YoY to USD 6,202mn. Remittances by overseas Pakistanis registered an increase of 18% YoY to USD 1,748mn during Sep’19 compared to USD 1,486mn during Sep’18.
The country wise data reveals that inflow from KSA, UAE, USA and UK amounted to USD 421mn (+17% YoY, +11% MoM), USD 363mn (+18% YoY, +4% MoM), USD 282mn (+17% YoY, -5% MoM) and USD 265mn (+22% YoY, +6% MoM), respectively. During 1QFY20, remittances went down by 1% YoY to USD 5,478mn compared with USD 5,558mn in 1QFY19.