Foreigners invest $100m in local equity markets

KARACHI: Pakistani stocks attracted $100 million in the ongoing month of March-2010, which is third highest monthly inflow seen since the National Clearing Company of Pakistan limited (NCCPL) started compiling the data from March-2007.

With this, the foreigners’ holdings in local markets have surged to $2.1 billion as of March 20, 2009 according to the State Bank of Pakistan (SBP), reported Farhan Mahmood, analyst at Topline Securities.

“With offshore investors’ $2.1 billion stake in local bourses, we expect 30-35 percent of which is parked in OGDC. This is followed by 10-15 percent of the total in MCB, 10-12 percent in PPL while remaining in other companies” he added.

The current holding of $2.1 billion is six percent of the overall market capitalization. But in relation to free float it is at 23 percent. Their (foreigners) peak holding was $5.1 billion (27 percent of free float) seen in April-2008 and lowest was one billion dollars (17 percent of free float) recorded in March-2009.

“Despite political and security concerns, the Pakistan stocks market have attracted net foreign buying worth $100m so far during this month,” he said.

This abnormal flow is the result of renewed interest of foreign fund managers in frontier and emerging markets, he said adding the increasing role of foreign trading can be judged from the fact that their share in total volumes in March 2010 was 15 percent as compared to average nine percent in 2009.

Interestingly, foreigners remained net buyers in Pakistan in the last 10 months with total net inflow of $419 million while the benchmark 100-Index gained 38 percent (33 percent in dollar) in the same period.

“Historically, we have seen since 2008 that there is a month in every year in which foreign buying has breached the $100 million mark. Accordingly, in Feb-2008 we saw net buying of $105 million then $127 million in Sep-2009 and now in March 2010 the offshore investors have bought shares worth $100m while one day of this month is yet to come,” said Mahmood.

However, unlike previous trend, KSE index is up only five per cent this month although it crossed 10,000-mark after 18 months. Last time when $100m plus net buying was seen in Sep 2009 at that time market rallied eight percent. Whereas, before that in Feb 2008 index rose by seven percent. Relatively less enthusiasm this time is due to aggressive profit taking by local investors amid liquidity crunch, he added.