Foreign investors have sold stocks worth over $200 million in the current calendar year to date at the Pakistan Stock Exchange (PSX) apparently due to return of volatility in the rupee-dollar exchange rate and downgrade of the bourse by the MSCI.
Foreign institutions were major sellers of stocks at the Pakistan bourse. They have sold shares worth $239.26 million since January 1, 2021, Topline Research said, citing the National Clearing Company of Pakistan Limited’s (NCCPL) data on Thursday.
However, foreign individual investors and overseas Pakistanis were the net buyers of stocks of listed companies worth $2.88 million and $32.68 million respectively.
Local individual investors and companies bought almost each and every stock sold by foreign institutions as well as by local banks, brokers and insurance companies, the data suggested.
The local individual investors bought shares worth $206.47 million, which was almost equivalent to the $203.74 million worth of stocks offloaded by foreigners. Besides, local companies have bought shares worth $51.55 million since January 1 to date.
Sector-wise, the highest selling by the foreign institutional investors was witnessed in local banks, which was valued at $81 million, followed by oil and gas exploration firms at $42 million.
They also sold fertiliser stocks worth $17.23 million at the PSX in the current calendar year.
In the same time period, they bought telecom and cement sector stocks amounting to $28.55 million and $24.63 million respectively.
Year 2021 is the second successive year in which foreigners have remained net sellers. They sold stocks worth a net $571.49 million during 2020. They bought stocks worth $55.75 million in the prior calendar year 2019.
“They purchased stocks in 2019 after the return of sustainability to the rupee-dollar parity,” Pak-Kuwait Investment Company Head of Research Samiullah Tariq said while talking to The Express Tribune.
In 2020, the foreigners sold stocks globally to keep cash in hand to cope with the Covid-19 pandemic.
In 2021, they offloaded holdings primarily due to downgrading of PSX to MSCI Frontier Markets (FM) Index. MSCI proposed to reclassify PSX into FM from Emerging Markets (EM) in June. It consulted investors on the subject and announced in September to downgrade the local bourse with effect from December 1, 2021.
“Accordingly, the global investors, who had invested in local companies when PSX was part of the Emerging Market Index (2017-2021), are now selling stocks compared to nominal sales by them in the first four to five months of 2021,” he said.
In addition, they opted to sell local stocks in wake of return of volatility in rupee against the US dollar since May 2021 and structural imbalances particularly on external front such as widening trade and current account deficits, higher fiscal deficit and worsening balance of payment issues. The spike in import payment compared to a relatively slower growth in export earnings caused the structural imbalances in the domestic economy since start of the current fiscal year on July 1, 2021, he said.
Published in The Express Tribune, October 8th, 2021.
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