PSX equity market remained volatile in 2021

The beginning of 2021 was exceptional for the equity market as the index witnessed a massive jump on the back of reopening of global economies and a V-shaped recovery locally, which translated to an all-time high profitability of listed companies together with slowdown in COVID-19 infection ratio. Effective vaccine rollout played a key role in reviving sentiments. On the macroeconomic front, the Current Account remained in surplus in early part of the year, tagged with Pak Rupee strengthening (PKR 153 against USD), robust growth in LSM, GDP growth rate climbing up, lower CPI reading amid low international commodity prices, unchanged interest rate at 7%, surge in exports and lower imports all contributed to the positive momentum.

However, this celebration remained short lived as political noise coupled with macroeconomic indicators turning red, changed the sentiment. In particular, pressure on the external account, rising inflationary reading, recurring waves of COVID-19, delay in approval of IMF’s sixth review, and transition from Emerging Market to the Frontier Market put pressure on the bourse. Moreover, foreign exchange reserves started depleting, with the Pak Rupee losing significant ground against USD. Whereas the State Bank had a shift in policy, resuming monetary tightening in order to maintain sustainable growth and avoid another boom and bust cycle like those seen before.

That said, the index has closed on 44,596 points, generating a return of 1.9% (USD based return of -7.7%).

Courtesy – AHL Research

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