The benchmark KSE-100 index during the second last lap of the calendar year went up by 6.80 percent, following a political pit-stop in October. The month of November tested the resilience of local individual and institutional investors and it is fair to say that both passed the test with flying colours.
After Americans voted in Donald Trump, the world markets especially the emerging and frontier start re-balancing in the wake a new political and policy shift. Since November 9th, all developing markets have seen outflow of foreign portfolio investments. Pakistan was no different with $117mn worth of net foreign outflow. However, mutual funds and individuals stayed strong absorbed the foreign selling while taking the index upwards. Back in the day this kind of foreign selling used to trigger a major slide in the market and the KSE-100 index used to shed 5 to 7 percent easily.
Performance wise, cement sector gained the most during November followed by textile and autos. Contribution from fertilizer sector remained subdued as monthly urea off-take and inventory position did not impress the market participants.
According to data compiled by MUFAP (Mutual Funds Association of Pakistan), equity funds posted an average return of 7.24 percent in November. JS Growth Fund was the best performer in this category with a return of 10.55 percent. JS Large Cap Fund was the second best performing fund in this category for the month of November with a return of 9.01 percent.
Shariah compliant mutual funds returns averaged at 7.31 percent versus the KMI-30 Islamic benchmark index return of 7.18 percent. The top performing fund in this category was the JS Islamic Fund with a return of 10.59 percent. The second spot went to Alfalah GHP Islamic Stock Fund with a return of 9.01 percent.
Mr. AAH Soomro, the fund manager of both JS Growth and JS Islamic Fund, said that his funds overweight positions in cement, textile and stocks with growth stories were the main reasons for their out performance. Scrips such as Cherat Cement (PSX: CHCC) contributed positively to both Growth and Islamic fund. A healthy weightage in Nishat Mills (PSX: NML) for their Islamic Fund meant that they were able to take full advantage of the rally in textile stocks as well. He maintains his overall bullish stance on the market heading into 2017.
The last leg of 2016 has commenced and the stock market is showing no sign of weakness. The KSE-100 index is still trading below 10x price to earnings ratio, offering a massive to discount to its regional peers. Every new month is also taking us closer to the reality of CPEC which means that valuations keep on getting revised and growth stocks keep on getting re-rated. Stay calm and stay bullish is the word on the street.
