Foreign buying falls 77% at bourse in 2011

International fund managers reduce exposure to developing countries.

KARACHI:

Foreign buying has fallen by 77 per cent in the first six months of 2011, a trend seen in all developing economies.

After huge foreign inflows seen in developing markets including Pakistan last year, foreign fund managers have seemed to have started to reduce their exposure to these markets, according to a Topline Securities research note.

This is linked to the cautious stance by global investors after rising inflation resulted in high interest rate scenario. Subsequently, reduced inflows were witness across Asia which includes countries like China, India, Vietnam, Korea, Taiwan and Thailand, adds the note.

Even India, the fastest growing economy in South Asia, attracted a mere $293 million as against $6.9 billion in the same period last year.

Total foreign activity during last six months stood at $750 million with gross buying of $406 million and gross selling of $345 million, 29% lower than $1.1 billion witnessed in the same period last year.

Net foreign buying in this period stood at $63 million compared to $271 million in same period last year.

Slowdown in the foreign inflows can also be attributed to reduce activity at the local bourses where volumes have dipped to record nine-year low. Investor confidence has been further shattered by reimposition of the Capital Gains Tax and its cumbersome calculations, says the note.

Hence, foreign flows were affected as offshore investors found it difficult to execute their desired orders at the Karachi Stock Exchange, the note concludes.

Published in The Express Tribune, June 30^th, 2011.