Local investors pull out Rs11bn from stock markets

KARACHI: Local investors have divested Rs11 billion from country’s stock markets since January 01, 2010 to date, according to National Clearing Company of Pakistan Ltd (NCCPL).

The local investors were moving from bourses to National Saving Scheme and fix income investment products, stocks brokers said.

“Some of local investors were found shifting their investments from equity markets to fixed income instruments,” said M Siddique Dalal, a broker at Karachi Stock Exchange (KSE), adding, these fixed income instruments include National Saving Schemes and government securities like treasury-bills, Pakistan Investment Bonds (PIBs) etc.

Yaseen Lakhani, a broker at KSE, said, “A lot of speculations about the ending of President Zardari era in near future since he came into power, and worst energy crisis on economic front were not allowing locals to stay in bourses.”

Local equity investors include Pakistan based companies, mutual funds, banks/ Development Financial Institutions (DFIs) and individual investors.

As per available records with NCCPL, the companies withdrew Rs2.81 billion during January 01, 2010 to date; mutual funds divested Rs3.84 billion during the mentioned period; and individual investors took out Rs4.88 billion from the equity markets. Banks/DFIs remained net buyers worth Rs340 million approximately.

“The unstable situation of local bourses amid higher interest rate regime in the country have convinced locals to switch their investment from stocks markets to fixed income products,” said a leading analyst.

On the contrary, the foreign investors continued to drive market up with pumping notable amount since the beginning of this calendar year. During the period under review (January 01, 2010 to date), they (foreigners) have poured-in net Rs9.64 billion, placing the Karachi bourse above near 10,000-point.

During the last two-week period, the market has breached through 10,000-point psychological level several times. But continued profit-selling by locals was not allowing market to sustain with the said level.

Lakhani said that the invested amount by foreigners in Pakistani equity markets is much smaller than they invested in Indian stocks markets during the same period. They (foreigners) have injected over Rs200 billion (or $2.4 billion reportedly) in Indian markets during the last one month period.

While, Indian market is 2.5 times expensive than Pakistani markets, he said, Pakistani markets were trading at ‘price to earning ratio’ of seven, while Indian markets were trading at ‘price to earning ratio’ of 17. This comparison explains investment sentiments in the country’s equity markets.