KSE sees massive inflow of $29.274m

KARACHI, Mar 14 (Business Recorder): A massive inflow of $29.274 million of foreign portfolio investment at the local equity market was witnessed during the outgoing week ended Friday.

According to National Clearing Company of Pakistan Limited (NCCPL) data, the cumulative inflow of this mode of investment has increased to $56.920 million during the current month.

"The massive inflows of foreign portfolio investment show the strong interest of off-shore investors at the local equity market mainly due to attractive level," analysts said. The local equity market is still at cheapest levels in the region, they added.

"It is a surprise net buying of $57 million by the off-shore investors in Pakistan equity market recorded in just two weeks," Muhammad Sohail, senior analyst and CEO of Topline Securities said. This is the second time such a huge inflow has been witnessed in two weeks ever since NCCPL started issuing weekly data from March 2008, he added.

He said in spite of the massive inflows, the benchmark KSE index is up only 5 per cent in 2 weeks, though it crossed 10,000 mark after 18 months. The last time when $57 million plus net buying was seen in September 2009 and that time the market rallied 6 per cent.

On a weekly basis, this is the fifth highest weekly inflow. "There can be some re-routing by locals to avoid tax officials for source of funds before the imposition on capital gain tax from July 2010, but, we think, the quantum of such trades would be much lesser," he added.

He said with share prices increasing only 5 per cent in last couple of weeks despite abnormal inflows, it has been proved that local investors are selling at times aggressively. In last two weeks local companies sold (net of buying) shares worth $17 million, local individuals offloaded $15 million and local banks $11 million.

The liquidity crunch, where the government is aggressively borrowing (through T-Bills and National Savings at 12-13 per cent approx), is the main reason why locals were net sellers and which is why there is little enthusiasm amongst the local investor community, he added. According to him, the likely announcement of tax-laden budget, maintenance of tighter monetary stance by the central bank and security concerns forced locals to book profits.