Ahmed Malik

Foreign portfolio investors are back to cash in from gains in the Pakistan Stock Exchange (PSX), which has been making records in quick successions since the recent approval of Stand-By Arrangement (SBA) with the International Monetary Fund (IMF). The equities remained depressed during the last few years, but remarkable progress has been witnessed during the last five weeks in shape of massive investments in the stock market compared to other avenues like gold, foreign currency, real estate etc. Local investors immediately started making gains since the day Pakistan entered the IMF deal as stocks bounced back sharply after remaining entangled for a long period. Foreign investors also didn’t waste time to reap the benefits of historical bullish trends in the capital market of Pakistan. The PSX saw net buying of more than $19 million in July 2023. Foreign portfolio investment has increased, but its sustainability will depend on political stability, compliance with IMF conditions, PKR trend, etc.

At present, foreign investors are fully active in the local market. Foreign investors’ growing interest in the country’s capital market is mainly driven by the gains offered on investment in banking, oil and gas, and refineries sectors. About the remarkable performance and burgeoning foreign investment in it, Sana Taufiq, an analyst at Arif Habib Limited, said that the stock market is considered a “leading indicator” of the economy, which means that the direction of economy is right. She said the unfolding developments on economic front, like the IMF loan approval and financial assistance from friendly countries, have provided much-needed breathing space to the economy, and also pulled back foreign investors to the capital market.She said the banking sector has been making handsome profits after interest increased in the country. She said the healthy balance sheets of the banking sector are proof of the profits the banks have been making for the last many months.

Banks are sharing their profits in the form of dividends to the shareholders, and foreign investors are eyeing these dividends and gains on investment in the banking sector along with local investors. “The banking sector alone contributed 75% to the overall rise of around 6,000 points during the last five weeks,” said Adil Ghaffar, Member PSX, while talking to WealthPK. Pakistan has seen positive developments in the oil and gas sector recently. “The formation of Special Investment Facilitation Council and passage of legislation for Pakistan Sovereign Wealth Fund are stepping stones to realise the potential of local and foreign investment in diversified sectors of the economy,” noted Muhammad Rameez, Head of Sales at Foundation Securities. He said that as the oil and gas sector is a major avenue to attract investment, the recent developments have rekindled the hopes that major investment would be pouring in this sector. The refinery sector also pulls foreign investment in the stock market after the government’s plan to approve the “Brownfield Refinery Policy” to upgrade the local refineries. The approval of the policy would pave the way for investment to the tune of $4-5 billion.

Credit: INP-WealthPk