Foreign buying increases more than 20 times

Individual participation declines in 2010.

KARACHI: Local investors remained bearish in the stock market due to liquidity crunch amid heavy borrowing by the government, but foreign funds saved the bourse in the outgoing year.

Foreigners did net buying of $0.5 billion in 2010 compared with only $24 million in 2009, an increase of more than 20 times. High government borrowing is crowding out private investment in the country and local investors prefer to park their funds in risk-free government papers or high-yielding bank deposits, said Topline Securities analyst Farhan Mahmood.

Local companies sold shares worth $168 million on net basis during the year whereas mutual funds sold $127 million worth of shares.

Offshore funds now hold shares worth $2.9 billion as of December 17, which is eight per cent of the market capitalisation and 31 per cent of free float. Their peak holding was $5.1 billion in April 2008 and the lowest was $1 billion in March 2009. With no big initial public offerings in the near future, foreigners’ share in local bourses will continue to increase, said Mahmood.

Published in The Express Tribune, December 29^th, 2010.