Let me and you accept the harsh reality that 2022 was a bad year for Pakistan’s capital market. Market value (market capitalization) of companies listed at Pakistan Stock Exchange (PSX) declined 17% to RKR6.4 trillion. In US$ terms it plummeted 35% to US$28 billion. Still there are some islands of excellence.
Real Estate Investment Trust (REIT), Synthetic & Rayon, and Sugar were the top performing sectors in 2022 as their market cap increased by 12%, 6% and 5% respectively, despite bad market conditions.
Technology sector was up 2% and outperformed the market despite fall in global listed technology stocks.
As against these, Engineering, Automobile Parts, and Miscellaneous sectors remained the worst performing sectors posting decline of 45%, 41% and 34% respectively.
REIT sector that has only one listed company gained in 2022 due to stable dividend yield coupled with changes in regulations on REITs investment for banks. To recall, State Bank of Pakistan (SBP) recently allowed banks to count their investments in shares issued by REIT towards achievement of housing and construction finance targets.
Synthetic & Rayon also posted strong performance led by rally in Ibrahim Fiber Limited (IBFL).
Sugar sector performance was led by JDW Sugar Mills (JDWS) that announced buy back.
Engineering sector (mainly steel related companies) was badly impacted due to economic slowdown and subdued construction activity.
Automobile parts sector also remained amongst worst performing sectors primarily due to import restrictions, high financing rates and lackluster demand.
For its analysis, Pakistan’s leading brokerage house, Topline Securities assumed sectors with minimum market capitalization of US$100 million adjusted for new listings including Adamjee Insurance (AICL), and Telecard Limited (GEMSNL).
Lotte Chemical (LOTCHEM) doubled while Airlink was down substantially in 2022. LOTCHEM was the top performing stock of the market in 2022 where the scrip gained more than 100%. Investors were excited over potential sell off by Lotte Chemical Corporation South Korea (parent company of LOTCHEM) and subsequent public offer for minority shareholders.
LOTCEHM was followed by Faysal Bank (FABL) and Unilever Pakistan Foods (UPFL). The strong stock performance by FABL is on announcement to convert into an Islamic Bank followed by a special dividend.
Similarly, UPFL stock was up 34% as the company posted strong profitability growth of 33%YoY in 9M2022.
Systems Limited (SYS), Pakistan’s largest listed IT firm remained amongst the top performing stocks for the third consecutive year as the company continued to post strong profitability growth in spite of economic challenges.
Air Link Communication (AIRLINK) declined 54% due to low profits led by lower volumetric sales.
Gul Ahmed Textile Mills (GATM) also reported decline by 52% amid slowdown in textile exports.
Searle Company Limited (SEARLE) was down 52% due to lower profits led by falling gross margins driven by significant jump in raw material cost and company’s inability to immediately pass full impact on to consumers.