Analysis: Local investors confused and concerned

Investors in Pakistan are confused as to what will happen if local bourses see similar selling by foreigners

Express August 06, 2011


At a time when the local bourse is passing through an extremely low volume phase, the global stocks have tumbled amid concerns that US economy is weakening.

Most of the investors in Pakistan who have not made money this year are confused and concerned as to what will happen if local bourses see similar selling by foreigners, said Topline Securities analyst Farhan Mahmood. Though, the corporate earnings in Pakistan will post above average growth, depleting market depth may cause market volatility in case foreigners tried to dump shares to reduce their exposure to frontier and emerging markets.

The selling in world markets gained momentum as Japanese and European policymakers stepped in with dramatic measures to shore up their financial markets. In Pakistan, so far offshore investors have sold on net basis shares worth $30 million in the last 13 sessions. And now the concern is with falling global markets would there be more selling, says Mahmood. Amidst this fear the local bourse may remain under pressure in the short run and will move in line with regional markets, added Mahmood.

All is not lost as corporate earnings are expected to post 27% earnings growth in 2011, far better than historical trend. This is evident from recent first half results where fertilizers and few banks posted more than 60% and 25% earnings growth, respectively, which will likely to continue in the next six months.

Published in The Express Tribune, August 6th, 2011.