Foreign investors sell $42.42mln worth of govt securities in Q1

KARACHI: Foreign investors sold a net $42.42 million worth of government securities during July-September of the current fiscal year, and analysts expect economic pitfall risks and coronavirus-related global uncertainty to keep Pakistan’s hot money inflows cool in the coming months.

Data issued by the State Bank of Pakistan (SBP) on Friday showed that foreigners sold securities such as treasury bills and Pakistan Investment Bonds worth $166.81 million in July-September FY2021. However, they bought bonds worth $124.39 million in the three-month period under review. International investors have been reducing their exposure to Pakistan’s bonds since panic gripped global financial markets amid COVID-19 outbreak in March, and diverting investments towards safe havens from emerging markets.

Furthermore, lowering yields on government’s bonds due to monetary easing by the SBP also led to the outflows from the fixed income and equity markets.

Muzzammil Aslam, CEO at Tangent Capital Advisors Private Limited, said the SBP has decided to pause in the last review, after following brief but aggressive easing. A 625 basis points cut in rates has never been witnessed in a single calendar year. “Pakistan’s local rates are still aggressive relative to global rates; this might attract flows subject to stable exchange rate. But given the global uncertainty led by US elections and COVID, Pakistan is unlikely to fetch dollars in fixed income and equities till December, in our view,” Aslam said. An analyst at Foundation Securities said the amount invested by foreigners in debt markets was not a substantial number to comment upon. “Foreign investors are probably looking to make capital gains as the interest rate is still low. We don’t anticipate substantial foreign investment in debt markets in FY21,” the analyst said.

Foreign fund managers made significant investments into the T-Bills and PIBs, as higher returns on such securities, improvement in the balance of payments, reforms in the exchange rate market, and the International Monetary Fund (IMF) support package reassured foreign investors, which resultantly increased inflows.

Foreign investors also remained net sellers of shares at Pakistan Stock Exchange (PSX) during the period under review, the central bank data revealed. They sold shares worth net $120.98 million at PSX in the quarter.

Breakdown suggests they sold shares worth $258.23 million during July-September FY2021, while buying $137.25 million shares during the three months.