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KARACHI: Drawing curtains to MSCI-EM, the KSE-100 Index closed November 2021 at 45,072.4 points denoting a negative 2.5 percent performance during the month while marking the highest volatility calendar year to date.

Factors at play were the central bank mounting on aggressive monetary tightening (150bps hike in policy rates and 1.0 percent increase in cash reserve requirements of Commercial Banks), Pakistan reaching staff-level agreement with the IMF, authorities successfully deploying diplomatic relations with Saudi Arabia to gain $3.0 billion in deposits and $1.2 billion in oil deferral facility and MSCI related rebalancing, Hamza Kamal at AKD Securities said.

The average trading volume for the month stood at 316.1 million shares compared to 279.7 million shares in October’21 with activity largely tilted towards main boards (KSE/KSE-ALL volume at 29.1 percent versus 26.7 percent during FY to date).

Sector-wise, amongst the main boards, fertilizers stood as the only sector yielding positive return of 2.3 percent given the defensive nature and increase in global prices improving earnings outlook while Cements (down 5.6 percent) stood as the worst performer primarily as a result of negative rebalancing flows and concerns on demand outlook overshadowing ease-off in coal prices (down 36.6 percent on month-on-month basis).

Overall, Jute sector turned out to be the best performer with 10.6 percent on month-on-month basis gain while laggard was the Auto Parts Manufacturers (down 7.2 percent on month-on-months basis).

Foreigners’ net sell stood at $141.3 million in November’21 particularly related to MSCI-related rebalancing. Dissecting further, gross buy and sell by foreign corporates stood at $69.8 million and $210.0 million respectively with Banks and Cements witnessing the highest outflows of $89.6 million and $38.5 million respectively while fresh inflows of $25.0 million and $12.8 million were recorded in banks and techs, respectively. Foreign outflows during the current fiscal year to date stood at $255.6 million.

On the local side, companies with a net buy of $49.2 million followed by Insurance (net buy: $29.6 million) stood as the major participants absorbing EM-focused funds’ exit from the market.

Hamza Kamal said that global commodity prices are in a downward spiral as Covid’s new variant, “Omicron” threatens global economic growth outlook with TRJ Commodity Index down 4.5 percent in the past 15 days - providing much-needed confidence in Pakistan’s macro outlook.

Moreover, with the IMF-related uncertainty largely behind and MSCI-related re-balancing complete, these developments could act as a catalyst for the index gaining upward momentum with yearend phenomena carrying the index forward.

November’21 inflation at 11.53 percent on year-on-year basis with signs of higher inflationary readings in coming months would keep investors on toes with regard to the pace of monetary adjustments in our view, he added.

Copyright Business Recorder, 2021

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