Asset classes and their performance in Pakistan: all that glittered in 2022 was gold

Gold was the top-performing asset class in 2022 with a return exceeding 40% (according to the Karachi Sarafa market) as a depreciating rupee helped the precious metal gain in value in Pakistan.

Unofficial estimates would put the yearly return even higher, as some markets quoted the local price of gold at least 6-7% more than the Karachi Sarafa rates.

However, if one were to follow what qualify as 'official' rates of gold in Pakistan, the return would be 41%, according to brokerage house Topline Securities.

Meanwhile, in terms of other top-performing assets, US-Dollar denominated Naya Pakistan Certificate (NPCs) and the US Dollar itself were second and third, respectively, found Topline Securities.

“These asset classes provided better returns compared to estimated average CPI inflation of ~20% in outgoing calendar year 2022,” it said in the report titled, 'Asset class returns of Pakistan in 2022'.

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As per the report, gold posted a gain of 41% in 2022, rising from Rs108,200/10 gm to Rs152,700 after a gain of 11% in 2021.

“In local sarafa/bullion market, gold rallied in line with an increase in USD rate in the black market,” it said. “Currently gold is valued at black market parity rather than the official rate, which is lower.”

Talking to Business Recorder, Sunny Kumar, Deputy Head of Research at Topline Securities and the author of the report, said gold, which is an imported commodity, has remained stable in the international market.

“However, the depreciation in Pakistani Rupee during the year drove the high return."

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Moreover, holders of the Naya Pakistan US$ Certificate under Roshan Digital Accounts (RDA) also made a 36% return (including interest) in PKR terms due to falling rupee value.

“Similarly, holders of greenbacks made a gain of 28% in 2022 as the official bank rate of USD rose from Rs177 at end of 2021 to Rs226 at present,” read the report.

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During the year, investors also transferred their capital to fixed-income instruments due to rising interest rates—the policy rate in Pakistan increased from 9.75% to 16% in 2022.

“Following this, the 3-month T-Bill average gain was 14% in 2022. Similarly, local money market funds also generated a 14% average return in 2022,” said the report.

Moreover, return on bank deposits (excluding current account) and Special Saving Certificates issued by the Government of Pakistan was 11% on average in 2022.

Meanwhile, the widely followed property/real estate sector was also affected in 2022 due to macroeconomic concerns.

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Indices tracking houses, plots and residential property were up 12-14% in 2022.

“Although the overall growth in the real estate sector is okay, the industry has been dented by an overall reduction in construction activity and economic slowdown,” said Kumar.

On the other hand, Pakistan’s weak external account situation, rising interest rates and political uncertainty led to lower interest in equities and bonds.

Government bond prices fell due to rising policy rates. “Benchmark 10-year PIB posted a negative return of 2% (inclusive of 8% coupon) in 2022,” said the report.

The stock market along with equity funds underperformed other major asset classes in 2022 with the benchmark KSE-100 Index declining 10%.