Foreign investors of Pakistan are immensely declining the stocks. As per the National Clearing Company of Pakistan (NCCPL), $21 million net foreign outflows were observed last week. Foreigners discarded local equities worth a shocking sum of $65m in the span of one month.
“Foreign portfolio investment in the stock market during the first six months of the current fiscal year has also stood at $18.8m after four years of heavy selling by foreign investors,” Ministry of Finance.
Financial strategists estimate, at the moment foreign investors hold around $4.7 billion in Pakistani assets. It is pertinent to mention that the amount does not constitute strategic holdings.
The cardinal reason for foreign outflowing of money is uncertain. The government announced the privatization of OGDC and PPL, which irked some. Moreover, foreign investors also withdrawing funds owing to coronavirus.
However, many economists believe that foreign equity sell-off is not specific to Pakistan. As per Atif Zafar, chief economist and director of research at Topline Securities, “Fund managers are under pressure owing to a weak global growth outlook as the scare and repercussion of coronavirus take their toll.” He added, “It has triggered sell-off inequities in both emerging and frontier markets because asset managers run to seek the safety of safe havens,” As per Atif Zafar, chief economist and director of research at Topline Securities.
Besides, many analysts believe, the current geopolitical position is also forcing foreigners to outflow their money. The uncertain Afghan peace deal has not yet clear the future of the region. Similarly, the high cost of doing business in the country is driving investors out.
Furthermore, many think red-tapism along with an unstable economy and uncertain political situation also hinders the way of foreign investment.
Dr. Reza speaks on the matter!
A few days back, Dr. Reza talked about the outflows. He said, “We have put measures in place to reduce the risk (of outflow) and take maximum benefit of the investment. I just want to assure there is nothing to be worried about.”
According to him one of the significant reasons for outflows is Coronavirus. He said, “Nothing has changed on the ground domestically. International concern over the Coronavirus has led to this reduction in foreign investment in the domestic sovereign debt securities.”
As per official data of State Bank Of Pakistan (SBP), since July 2019, foreigners have invested a total of $3.47 billion and took out $313.93 million.
The stock market of Pakistan is shockingly owing to the rapid outflow of foreign investments. The situation is curbable, with certain remedial measures. Pakistan needs to improve the environment of business. The country needs to wait and see the impact of the Afghan Peace Deal. Similarly, Pakistan shall remain calm until the vaccine for Coronavirus develops.
Furthermore, Pakistan shall focus on domestic issues like curbing energy crisis along with extremism to motivate local industries.
In a nutshell, Pakistan trade deficit decreases, it can be further elevated if Pakistan focuses on the development of the local industry. Once the domestic issues resolve, foreign investment will come heavily into the country.
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