PSX performance in CY21: Technology and textile spinning top performing sectors

KARACHI: Technology and textile spinning were the top performing sectors during the calendar year 2021 posting returns of 37 percent and 35 percent, respectively based on market cap.

This is compared to KSE-100 Index, which is up 1.0 percent (negative 9.0 percent in US$ terms) in 2021 to date (7 trading sessions remaining). On the other hand, tobacco and refinery sectors remained the worst performing sectors posting decline of 35 percent and 29 percent, respectively.

Technology sector in line with global trend continued to remain investor’s favorite sector post-pandemic. Pakistan’s rising IT exports, government focus to facilitate IT sector, and PKR devaluation have led to higher sales and profitability for the tech sector. Textile spinning sector also posted strong gains in 2021 amid rising exports, record cotton prices and huge inventory gains during the year.

In contrast, tobacco sector remained impacted due to increasing competition from illicit and unbranded cigarettes available at discounted rates (due to duty and tax avoidance). Refinery sector was also amongst worst performing sectors primarily due to delay in refinery policy and news reports of with drawl of certain incentives that were previously announced.

“For our analysis, we have assumed sectors with minimum market capitalization of $150 million adjusted for new listings”, Umair Naseer at Topline Securities said. “Similarly, for stocks we have taken companies with minimum free float market capitalization of $15 million and 2021 to date average minimum traded value of Rs15 million. We have adjusted stocks for dividends, rights, and bonus. Our cut-off date for price and market cap is December 22, 2021,” he added.

Telecard (TELE) was the top performing stock of the market in 2021 where the stock value gained by over 5x. Investors were excited about rising profits and prospects of the company on likely IPO of its wholly owned subsidiary Supernet. Further, award of long term business contracts to Supernet, and opportunities that may arise from technology sector boom is also seen as a positive for the stock.

TELE was followed by TPL Properties (TPLP) and System limited (SYS) that also registered strong gains in 2021. TPLP successfully completed the sale of its first property project Centrepoint in 1H2021 against sales proceeds of ~Rs8bn, generating an ROI of 130 percent. The company has also planned to launch its REIT in FY22, which generated investor’s interest during the year. Systems Limited (SYS), Pakistan’s largest listed IT firm remained amongst the top performing stocks for the second consecutive year as the company continued to post strong profitability growth of 56 percent in 9M2021.

Hascol Petroleum (Hascol) was the worst performing stock of 2021. HASCOL’s stock was severely impacted on news of its loan default, and governance issues. Azgard Nine (ANL) was also amongst worst performing stock in 2021 as the company recorded 29 percent decline in profitability at a time when the overall profits of textile sector are rising. Further, uncertainty regarding the outcome of its financial restructuring also weighed negatively for the stock.

Copyright Business Recorder, 2021