2018 marked a second consecutive year with negative market returns. KSE-100 plunged by 8.4% (27% in USD terms) to close at 37,067 points, just shy of recent low of 36,663 points seen in October 2018. Being an election year, 2018 remained highly volatile year for the market. Faltering macroeconomic environment including twin deficits, political dust owing to elections, uncertainty on currency and incessant foreign selling took the toll on the market during CY18.
Foreign selling remained persistent as foreigners divested shares worth USD 537 million during this year. This was the highest sell-off in last four years, bringing total divestment to USD 1.7 billion since CY15. Apart from weak economic fundamentals, PKR devaluation and downgrading of two stocks from MSCI EM main index were the reasons for selling. Among local investors, insurance companies (USD 316 million), individuals (USD 151 million) and companies (USD 110mn) remained net buyers.
The top three worst performing sectors which weighed down the KSE-100 index were Cements, Oil & Gas Exploration and Automobile Assemblers. Risk of oversupply owing to new capacities, and possible slowdown in economy deteriorated the performance of cement sector. Auto sector declined due to expected drop in demand on account of ban on non-filers and further currency depreciation. Plunge in international oil prices kept the performance of Oil & Gas sector under pressure.
The portfolio of Cyan decreased by 7.2% in 2018 against KSE-100’s decline of 8.4%. From sectors perspective, Engineering and Textile Composite had affected the performance during the year. The largest negative impact from a single stock came from the portfolio’s largest holding of 25.4% in Dawood Lawrencepur Limited.
Average exposure to equities during the year remained at 96%, whereas 4% was invested in mutual funds and Government Securities. The equity portfolio was aligned towards high growth investments and to this effect investments were made in Commercial Banks, textile composite, Steel, Chemical, Cement and Food & Personal Care. Achieving Milestones Seven years ago, the market capitalization of the Company was Rs.1.95 billion, which has increased to PKR 2.29 billion in 2018.