Foreign investment in equity market down 22 percent

KARACHI: Foreign portfolio investment in the equity market of Pakistan has fallen by 22 percent in the last four months, National Clearing Company of Pakistan Limited (NCCPL) data revealed on Monday.

A total of $118.69 million outflow was recorded from January 1, 2016 till April 30, 2016 in Foreign Investor Portfolio Investment (FIPI), a fall of 22.15, compared to the outflows of $97.16 million the same period last year.

During this period, a total of $79.03 billion investment arrived in the country, a 13 percent decline against the outflows $91.46. Foreign investors included foreign individuals, foreign corporations and overseas Pakistanis, the data said.

With exception to foreign individuals, whose net purchases remained $4.09 million on the positive side, both foreign corporations and overseas Pakistanis were net sellers with $11.05 million and $16.62 million outflows, respectively. 

Ahsan Mehanti, an analyst at Arif Habib Corp, told The News that there were two major reasons for an increase in the outflow of the FIPI; firstly, Emerging Markets (EM) and Asian markets were under pressure including China, India, Hong Kong and Singapore, where foreign fund managers were pulling back the money.

Secondly, there was redemption in the US economy and funds were moved there to support that market.   

During the first ten months of FY16, from July 1, 2015 till April 30, 2016, a total of $359.37 million outflows were recorded from Pakistan’s equity market.

The NCCPL data shows that the fertiliser sector of Pakistan was the worst sufferer, which saw an outflow of $3.47 million from December 9, 2015 till April 30, 2016. Second victim was the oil sector with outflows of $9,099, whereas cements and banks received inflows at $649,595 and $492,903, respectively.

Emerging Markets and Asian markets came under pressure because of the falling prices of commodities including fertiliser, cotton and oil.

A huge outflow from the fertiliser sector from Pakistan was observed in this situation, Mehanti said.

During the last 10 months of FY16, only European markets, especially Hungry and Russia were better performers.

He said that Pakistan’s equity market provided more return to foreign investors than that of the US, but still they were net sellers, which was their personal decision and they might be going out to provide relief to their economy.

Despite of an outflow in FIPI, Pakistan’s stock market performed well last week and an increase of 980 points or 2.9 percent was witnessed with the support of financial results.

Zafar Moti, a senior member of the Pakistan Stock Exchange (PSX), said though there was outflow of foreign investment from the stock market, the impact was not big, and the PSX remained stable as the market supported the earnings announcements.

Moti said results played the key role in the market and would continue their impact. Performance of the listed companies was better in Pakistan, due to the huge increase in the consumer base as no big company was established.

“Thus, more demand resulted in profits for the companies, which supported the market trend,” he said.

According to the special convertible rupee accounts (SCRA) data of the State Bank of Pakistan, UK, US, Luxembourg and Switzerland were the major net sellers during the 10 months of FY16.

The UK remained at the top with overflows of 37 percent higher against its investment during that period.

It was followed by the United States with 36, Luxembourg 32, and Switzerland with 29 percent outflows, compared with their inflows during this period.