KARACHI: Foreign investors sold net $322 million worth stocks during the year 2015.
Most investors curse overseas investors for having pulled down the market, which a day to the Banker Pakistan of the New Year, remains flat, giving stock investors a pittance of 1.7 per cent in returns, which fades in the face of average 33pc return provided by the Pakistan equities in the preceding three years.
The outflow, however, is made up of the collective figures over the year by the National Clearing Company Limited (NCCL). Some optimists have found reason to dispute the notion that foreigners were net sellers during the year.
“Pakistan equities depicted a correlation to emerging economies in terms of foreign flows and resultantly witnessed a net foreign outflow of $322m in calendar year 2015, compared to $383.5 inflow from last year,” admit analysts at brokerage Invest & Finance Securities Limited.
Yet they argue that foreign investors’ participation does not take into account the huge sum of $800m pumped into the market as the sum of money received as consideration in privatisation of Habib Bank Limited.
If that amount was accounted for, the net foreign inflow would clock in at $478m. Other participants, however, scoff at the idea of drawing conclusion from one-off item when the foreign portfolio investment had trickled out all through the year, resulting in noticeable bleeding.
“A single swallow doesn’t make a summer,” said one major market participant. He asserted that foreign funds were inclined to stampede out of the emerging and frontier markets in anticipation of interest rate rise in developed markets.
“If nothing else, the sentimental impact of the slow but sure exit of offshore investment in equities on a daily basis was enormous,” he said but justified the trend as investment from abroad is always reckoned to be ‘hot money’ or ‘smart money,’ since it can exit as quickly as it enters.”
Back-of-the-envelope calculations suggest that foreign investment in Pakistani equities is around $6bn.
The KSE’s market capitalisation is currently $68bn, of which the free float is reckoned to be $24bn.
Since overseas investors hold over a quarter of that free float, mostly in KSE-100 index heavyweight stocks, even the slightest outflow is discernible in equity prices.
Zubair Ghulamhussain, head of equity sales at Foundation Securities, identified one reason for the large outflow: “oil-rich nations are redeeming their sovereign funds to manage their budget deficits.”
He pondered for a moment and opined that taking HBL privatisation proceeds into account in calculating the foreign investment trend during 2015 was not altogether wrong.