Equities underperform: Cryptocurrency, property best performing asset classes

KARACHI: Amongst major asset classes used by local investors, cryptocurrency and property remained the best performing asset classes in Pakistan in 2021 while Pakistan equities underperformed all other asset classes in 2021 posting return of 1.0 percent with 6 trading sessions left, analysts said. This remained much lower than equity historical 30-year CAGR of 14 percent, they added.

Cryptocurrency which is not currently officially recognized by Pakistan but used by many local investors, saw huge gains in 2021, Umair Naseer at Topline Securities said. Cryptocurrency thrived during pandemic on the back of retail investor influx, huge leverage availability, and low transaction cost. The widely followed Cryptocurrency Bitcoin has rallied by 87 percent in 2021 in PKR terms, he added.

Pakistan property market also remained star performer gaining 23 percent as per zameen.com plot price index. This was led by a series of incentive announced by the federal government and central bank (SBP) to support construction sector. Moreover, amnesty Scheme, low taxes, ability to park undocumented wealth, and opportunity for oversees Pakistanis to invest in housing through Roshan Digital Account (RDA) led to strong interest in Property sector in 2021.

Pakistan’s weak external account situation and rising interest rates led to lower interest in equities which despite posting decent returns in the first half of 2021 is likely to close flat in the calendar year 2021. KSE-100 Index peaked in the first half of 2021 at 48,726 index level on Jun 14, 2021 and since then it is down 9.0 percent due to concerns on Pakistan macros, he said.

Due to the pressures on external account situation of the country, Pak rupee also depreciated by 11 percent against US$. Thus, holders of US$ made decent returns while holder of Naya Pakistan US$ Certificate (Roshan Digital) also made 18 percent in PKR terms. Gold also posted gains of 10 percent in PKR in 2021 as investors continue to see Gold as a safe haven under uncertain economic outlook.

Fixed income returns were lower compared to other asset classes due to rising yields. Average yields on 1-year T-Bill stood at 8.3 percent, 1-year Special Saving Certificate stood at 8.6 percent whereas average rate on 10-year PIB stood at 10.4 percent.

Copyright Business Recorder, 2021