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Foreign investment in equities tops $6bn
By Dilawar Hussain
KARACHI: At the end of July, foreign portfolio investment had reached $6 billion. That was about three-times the foreign inflows into the country’s capital market at this time two years ago.
Over the seven months period in 2014, overseas investors have already bought net $648m worth local shares. Foreign net buying in July 2014 alone amounted to $68bn.
The free flow of foreign funds into the Pakistan bourses has been the major reason for the KSE-100 index gain of 3 per cent during the month.
“July was the fourth consecutive month of net foreign buying, which provided investors with a cumulative gain of 21pc in first seven months of 2014,” says Vahaj Ahmed at Topline Securities.
The free flow of foreign funds into the Pakistan bourses has been the major reason for the KSE-100 index gain of 3 per cent
He noted that in dollar terms, the Pakistan equity market had provided gain of 27pc as a result of currency appreciation.
The returns so far have placed Pakistan among the top 10 performing stock market for the third consecutive year.
Although foreigners, being essentially long term investors, put more cash into equities in July, conspicuous by their absence were the local institutional and individual investors who were spooked by the evolving uncertainties on the political front on consequences of a possible conflict between the government and some political parties determined to hold rallies on Aug 14, 2014.
The local participants also remained sidelined in July due to Ramazan.
During 2014YTD (Jan-July), foreign investors bought equities worth $1.7bn and sold $1.1bn, resulting in net inflow of $648m (including $311m participation in UBL’s secondary offering).
The amount has been adjusted against the official data of National Clearing Company of Pakistan that does not include UBL offering since it was not invested through the stock exchange.
“This amount compares favourably with $398m net buying in 2013 and $126m net buying in 2012.
In July 2014 alone, foreigners bought $140m and sold $72m, resulting in net inflow of $68m,” points out Topline analyst.
In a recent report, the investment analyst mentions that following the secondary offering of United Bank (UBL) in June 2013 in which major portion was bought by offshore investors, foreign portfolio investment in Pakistan reached Rs584bn ($6bn), according to official data, which surpasses the previous highest foreign investment of $5.1bn seen in the bull-run in April 2008.
Foreigners now hold 34pc free-float or 8pc of total market capitalisation against 27pc free-float and 7pc total market cap in April 2008.
Another study suggests that foreign investors’ (sponsors plus portfolio investors) hold around 29pc of equity in the Top 25 listed companies. The government, with 35 stakes in the equity market, remains the largest shareholder, while 23pc shareholding vests with the local institutions and 13pc with retail/high net-worth investors.
A stock broker contended that a blessing in disguise was the MSCI decision to relegate the local equity market from emerging market to frontier market back in 2008 after the infamous ‘floor’ debacles.
With the promotion of UAE and Qatar to MSCI Emerging Markets (MSCI-EM), Pakistan’s weight in MSCI Frontier Markets (MSCI-FM) has increased to approximately 6.1pc which encourages frontier market funds to continue cherry picking of local equities and increase their investments in Pakistan capital markets.
Published in Dawn, August 2nd , 2014
By Dilawar Hussain
KARACHI: At the end of July, foreign portfolio investment had reached $6 billion. That was about three-times the foreign inflows into the country’s capital market at this time two years ago.
Over the seven months period in 2014, overseas investors have already bought net $648m worth local shares. Foreign net buying in July 2014 alone amounted to $68bn.
The free flow of foreign funds into the Pakistan bourses has been the major reason for the KSE-100 index gain of 3 per cent during the month.
“July was the fourth consecutive month of net foreign buying, which provided investors with a cumulative gain of 21pc in first seven months of 2014,” says Vahaj Ahmed at Topline Securities.
The free flow of foreign funds into the Pakistan bourses has been the major reason for the KSE-100 index gain of 3 per cent
He noted that in dollar terms, the Pakistan equity market had provided gain of 27pc as a result of currency appreciation.
The returns so far have placed Pakistan among the top 10 performing stock market for the third consecutive year.
Although foreigners, being essentially long term investors, put more cash into equities in July, conspicuous by their absence were the local institutional and individual investors who were spooked by the evolving uncertainties on the political front on consequences of a possible conflict between the government and some political parties determined to hold rallies on Aug 14, 2014.
The local participants also remained sidelined in July due to Ramazan.
During 2014YTD (Jan-July), foreign investors bought equities worth $1.7bn and sold $1.1bn, resulting in net inflow of $648m (including $311m participation in UBL’s secondary offering).
The amount has been adjusted against the official data of National Clearing Company of Pakistan that does not include UBL offering since it was not invested through the stock exchange.
“This amount compares favourably with $398m net buying in 2013 and $126m net buying in 2012.
In July 2014 alone, foreigners bought $140m and sold $72m, resulting in net inflow of $68m,” points out Topline analyst.
In a recent report, the investment analyst mentions that following the secondary offering of United Bank (UBL) in June 2013 in which major portion was bought by offshore investors, foreign portfolio investment in Pakistan reached Rs584bn ($6bn), according to official data, which surpasses the previous highest foreign investment of $5.1bn seen in the bull-run in April 2008.
Foreigners now hold 34pc free-float or 8pc of total market capitalisation against 27pc free-float and 7pc total market cap in April 2008.
Another study suggests that foreign investors’ (sponsors plus portfolio investors) hold around 29pc of equity in the Top 25 listed companies. The government, with 35 stakes in the equity market, remains the largest shareholder, while 23pc shareholding vests with the local institutions and 13pc with retail/high net-worth investors.
A stock broker contended that a blessing in disguise was the MSCI decision to relegate the local equity market from emerging market to frontier market back in 2008 after the infamous ‘floor’ debacles.
With the promotion of UAE and Qatar to MSCI Emerging Markets (MSCI-EM), Pakistan’s weight in MSCI Frontier Markets (MSCI-FM) has increased to approximately 6.1pc which encourages frontier market funds to continue cherry picking of local equities and increase their investments in Pakistan capital markets.
Published in Dawn, August 2nd , 2014
