Market capital plummets 35pc in dollar terms: Another bad year for Pakistan stocks

KARACHI: The outgoing 2022 was another bad year for Pakistan stocks where the market capitalization of listed companies at Pakistan Stock Exchange (PSX) fell by 17 percent reaching Rs6.4trillion. In USD terms it plummeted 35 percent reaching $28billion.

Real Estate Investment Trust (REIT), Synthetic & Rayon, and Sugar were the top performing sectors in 2022 as their market cap increased by 12 percent, 6.0 percent and 5.0 percent, respectively in spite of bad market conditions, Sunny Kumar at Topline Securities said.

Technology sector was up 2.0 percent and outperformed the market despite fall in global listed technology stocks.

On the other hand, Engineering, Automobile Parts, and Miscellaneous sectors remained the worst performing sectors posting decline of 45 percent, 41 percent and 34 percent, respectively.

REIT sector that has only one listed company gained in 2022 due to stable dividend yield coupled with changes in regulations on REITs investment for banks.

To recall, the SBP recently allowed banks to count their investments in shares issued by REIT towards achievement of housing and construction finance targets.

Synthetic & Rayon also posted strong performance led by rally in Ibrahim Fiber Limited (IBFL). Sugar sector performance was led by JDW Sugar Mills (JDWS) that announced buy back.

Engineering sector (mainly steel related companies) was badly impacted due to economic slowdown and lower construction activity.

Automobile parts sector also remained amongst worst performing sectors primarily due to import restrictions, high financing rates and demand slowdown.

For our analysis, we have assumed sectors with minimum market capitalization of $100million adjusted for new listings including Adamjee Insurance (AICL), and Telecard Limited (GEMSNL).

Lotte Chemical (LOTCHEM) was the top performing stock of the market in 2022 where the stock gained more than 100 percent. Investors were excited over potential sell off by Lotte Chemical Corporation South Korea (a parent company of LOTCHEM) and subsequent public offer for minority shareholders.

LOTCEHM was followed by Faysal Bank (FABL) and Unilever Pakistan Foods (UPFL). The strong stock performance by FABL is on announcement to convert into an Islamic Bank followed by a special dividend. Similarly, UPFL stock was up 34 percent as the company posted strong profitability growth of 33 percent on year-on-year in the nine months of 2022.

Systems Limited (SYS), Pakistan’s largest listed IT firm remained amongst the top performing stocks for the third consecutive year as the company continued to post strong profitability growth in spite of economic challenges.

Air Link Communication (AIRLINK) declined 54 percent due to low profits led by lower volumetric sales. Gul Ahmed Textile Mills (GATM) also reported decline by 52 percent amid slowdown in textile exports.

Searle Company Limited (SEARLE) was down 52 percent due to lower profits led by falling gross margins driven by significant jump in raw material cost and company’s inability to immediately pass full impact on to consumers, Sunny Kumar, in his research report said.

Copyright Business Recorder, 2022