PSX bled today in tandem with all Asian markets (except GCC) as commodities shot up on worsening Ukraine situation as Brent shot past $130 (now at $123) and Gold touched $2000.
KSE100 closed at 43,267 down 2.88% losing1,284 points. Market had lost more than 1500 points but later recovered. Trading volume increased compared to last week and a total of 104.8mn shares worth of $36mn were traded.
Interestingly 'Individuals' were massive net buyers today after quite some time. Mutual Funds as usual sold massively to the tune of $6.65mn. They sold across the board except Oil. Local Funds have been consistently major sellers in the market and have sold around $47.5mn worth of equities year to date.
My sense is that Funds are facing redemption pressures from corporate clients. Corporates poured huge amounts in Funds in 2015 to 2017 in a low interest rate environment when Pakistan equities were experiencing a major surge on general optimism and inclusion of PSX in MSCI Emerging Market index. Since then as interest rates started increasing and corporates also started capacity expansion and investments, Funds have been witnessing consistent redemption pressure.
Another source of selling pressure on account of 'Funds' selling is owing to so called capital protection schemes that have been marketed by Asset management companies claiming to beat the market by actively managing exposure to risk assets. But since PSX has low depth such schemes have not been able to deliver promised results. But trading activity of these schemes has increased volatility of PSX and that too usually at worst times.
KMI30 (Index comprising of companies compliant to requirements of a certain shariah Board) dropped by 3.6% today substantially more that KSE100 Index reflecting selling activity of Funds benchmarked to this index.
"Foreigners' selling was just marginal today. And mainly in 'Banks'. All of 'Foreigners' selling has been absorbed by the market since it has been excluded from MSCI EM category. PSX just has to grapple with Mutual Funds selling now which has been relentless so far. And in absence of substantial buying from any other quarter, 'individuals' have to face the brunt of the selling.
'Insurance', another sector that has huge interest in PSX has lately been muted with mostly selling stance. Year to date "Insurance' is net seller of $7mn.