KSE-100 Index ekes out negative return of 6pc

RECORDER REPORT

KARACHI: The KSE-100 Index eked out a negative return of 6 percent during YTD 2018, to hover around 38,250 levels at present.

The index fared worse, with a negative return of 25 percent on year-on-year basis in US$, due to 21 percent devaluation of the local currency, analysts said.

"The local index underperformed global benchmark indices, which were already under pressure from factors such as US-China standoff and Brexit scenario," Ahmed Lakhani, an analyst at JS Global Capital said. Also, strong US$ (DXY Dollar index up 9 percent from low of previous 12 months) kept global commodities in check.

On the local front, average volumes and daily traded value have witnessed contractions during the year, shrinking by 21 percent and 43 percent, respectively.

Political news dominated the scenario, as a new apparatus emerged in the July 25 elections. Following the nomination of the federal cabinet, uncertainty has been casting dark clouds over market momentum due to a challenging external account situation and the time it is taking the government to finalize funding sources.

"For 2019, this point will remain relevant until resolution of the situation, beyond which attention might switch to how well the government balances fiscal consolidation and its goals of a welfare state," the analyst said.

On sector-wise basis, value-added textiles outperformed the KSE-100 index by 16 percent, largely on the back of expectations of higher profitability arising from PKR devaluation during 2018. Banks also outperformed the index (up 4 percent), in line with expectations due to strong earnings' outlook as interest rate hikes have expanded the sector's upside potential going forward.

Other sectors that fared better than KSE-100 index included Chemicals (up 21 percent, on higher margins) and Fertilizer (up 16 percent, amid improved pricing power). E&Ps underperformed (down 8 percent) the index on lower global crude oil prices, down 39 percent from peak levels during the previous 12 months.

The rout was led by cyclical sectors such as engineering (including steel, down 33 percent), Auto Assemblers (down 28 percent) and Cements (down 11 percent).

"Varying reasons including rupee weakness (for autos), and fiscal consolidation (for cements and steels) led to the respective underperformance," he said.