Analysts spell out reasons behind KSE's 'worst' performance against regional peers

The country's volatile stock market lost 10.10 percent or 3,398 points during the just-concluded month, ie, March. Pakistan's equity market performed what analysts said "worst" against its regional peers if MSCI frontier market, MSCI Emerging market and MSCI World indexes are to consider.
The multifactoral downtrend kept KSE-100 index in the red consecutively for last six weeks to close at 30,233.87 points on March 31st. The daily trading volume shrank by 31 percent to average on 167 million shares from 242 million of the preceding month (Feb'15).
Foreign selling appeared to be one of the most permanent drags on the local bourse that saw offshore investors selling their portfolios worth $71.4 million during the review month compared to $62.5 million in Feb'15.
"The bullish mood at the Karachi Stock Exchange witnessed a sharp pullback," viewed Syed Atif Zafar at JS Global.
The market's downtrend was mostly driven by continuous foreign selling, uneasy international and domestic political situation and concerns over futures rollover, the analyst added.
The MSCI frontier market index showed Pakistan equities losing 13.06 percent compared to the index negative return of 3.2 percent, lagging by 9.86 percent during the said period.
The MSCI Emerging market and MSCI World index were no exception as they contracted by 1.6 and 1.8 percent, respectively.
"Pakistan was the worst performing market of Asia Pacific region with a negative return of 13.06 percent," analysts said. They added that China gained the position of best performing market in the region with 2.41 percent return. According to InvestCap analysts, continuous foreign selling shook the confidence of local investors. What added fuel to the fire was Pakistan Rangers' raid on MQM headquarters on March 11.
"The market remained gloomy because of psychological effect and panic of investors despite positive economic developments," analysts said.
The risk-averse investors even ignored strong triggers like 50 basis points discount rate cut, Moody's rating upgrade for Pakistan's bond, the Asian Development Bank's affirmative feedback and Bloomberg's appreciation of the government's performance.
This, they said, was due to reports of notable foreign selling particularly the discharging position of Everest Fund.
"Everest Capital sold its major holdings on the market after its short position on the Swiss franc went wrong and resulted in significant financial losses."
Owing to the continued turmoil in the market, mutual-fund investors moved towards cautious end and made redemption calls to the funds which shifted them towards selling ends during the last days of the month.
Mutual funds, Atif said, offloaded their positions after getting hit by redemptions in a down trending market.
The month's best performing sectors were gas utilities (-2.3 percent) and food producers (-5.1 percent) while the laggards included pharmaceuticals (-18.9 percent) and banking (-14.7 percent) scrips.
"Looking ahead, we eye recovery in the market returns as focus has shifted back onto fundamentals and valuations from liquidity concerns," opined Atif of JS Global.