November marks highest foreign buying in PSX since 2017

KARACHI: Pakistan’s stock market saw the highest monthly net inflow of foreign portfolio investment in four years in November, as investors bet on the country’s economic recovery, a brokerage said on Thursday.

Foreign corporates bought shares worth $66 million and sold $31 million in November, resulting in a net buying of $35 million, the highest monthly inflow since 2017, according to Topline Securities.

"The benchmarky KSE 100 Index was up 17 percent in November alone." Analyst said Pakistan's surging stock market rally received a significant boost as foreign investors return, contributing to a 50 percent surge in the benchmark index since late June.

The market is now the world's second-best performer in this period, following Argentina. The rally is fuelled by positive developments, including Pakistan's ability to secure a loan agreement with the International Monetary Fund in July, averting a potential default.

With national elections scheduled for February, the country is experiencing a reduction in political and economic uncertainty. Inflation, a key concern, has also shown signs of cooling, providing the central bank with some flexibility after implementing interest rate hikes over the past two years.

Bloomberg cited Mattias Martinsson, the Chief Information Officer at Tundra Fonder AB, a Stockholm-based frontier market investor, who noted that foreign investors are factoring in diminishing political and economic uncertainty.

"What they see now is that there appears to have come into place a sort of political stability,

at the same time as economic indicators are improving and there is a strong likelihood of significant cuts in the policy rate during 2024," Martinsson said.

While the stock rally continues to attract bullish sentiment, Ali Khalpey, Head of Equity Capital

Markets at EFG Hermes in Dubai, highlights Pakistan's attractiveness compared to other emerging markets.

He anticipates foreign cash inflow to persist, emphasising that Pakistani stocks like Lucky Cement Ltd., United Bank Ltd., and Habib Bank Ltd. are appealing with their cost-effectiveness, high quality, and attractive dividend yields. Simultaneously, Pakistan's sovereign dollar bonds are delivering robust returns, among the best in emerging markets this month, approaching 15 percent total returns.