Pak Economy: No let-up in flight of foreign capital

AHMED MALIK

KARACHI (July 20 2008): The outflow of foreign portfolio investment from the country’s equity market continued during the outgoing week and the foreign investors withdrew over $22.359 million in this period. The cumulative net outflow of $43.802 million had been witnessed till July 18, 2008 while the cumulative figures of current calendar year (January 01, 2008 to July 18, 2008) was recorded at negative 288.351 million.

Analysts believe that the recent trend of declining foreign portfolio investment in the country’s equity market was mainly due to the prevailing political uncertainty, law and order situation, geo-political situation and the weakening of the country’s economic indicators.

“Despite many measures taken by the apex regulator Securities and Exchange Commission of Pakistan (SECP) and the Karachi Stock Exchange (KSE), the foreign investors’ confidence could not revived and they continued to withdraw their investments from Pakistan’s equity market”, a leading analyst said.

Many of the trading rules were amended, an extension of further two years was given for implementation of Capital Gains Tax, the entire CFS Mk-II was introduced. However, the bearish trend continued at the share market during the last three months.

The week started with a positive note as a fresh foreign portfolio investment of $149,246 came into the country’s equity market on Monday. However, an outflow of this mode of investment was seen during the remaining four trading sessions at the share market.

According to data released by the National Clearing Company of Pakistan (NCCPL) an outflow of over $14.084 million was witnessed on Tuesday, $567,089 on Wednesday, over $1.268 million on Thursday and an outflow of over $6.587 million on Friday. The data show that a total of over $111.032 million was withdrawn by the foreign investors from the country’s equity market in the previous month.

The Karachi Stock Exchange has witnessed heavy selling pressure during the last three months and the benchmark KSE-100 index had declined by 35 percent or 5,441.56 points from its all time high level of 15,676.34 points recorded on April 18, 2008. The overall market capitalization had also drastically declined by over 33 percent or Rs 1,594 billion to Rs 3,196 billion on July 18, 2008 from Rs 4,790 billion recorded on April 18, 2008.

Source: Business Recorder, 20/7/2008

 

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