October sees acceleration of outflows of stocks, Treasuries and GDP – Journal

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KARACHI: Foreign investment outflows in Pakistani stocks, treasury bills and investment bonds (GDP) in October were almost three times the inflows, reflecting waning investor interest in the most attractive opportunities.

Cumulative inflows during the month were $ 58.5 million while outflows jumped to $ 178.58 million; the cumulative net outflow in October was $ 120 million.

However, October turned out to be the worst month for investing in stocks, Treasuries and GDPs in the four months of the current FY22 fiscal year.

The highest outflow in October was on equity, with investors withdrawing $ 134.5 million against an inflow of $ 34.2 million. Outflows of treasury bills were lower than inflows. The inflow of treasury bills during the month was $ 16.6 million compared to an outflow of $ 13.8 million.

GDPs suffered a setback as they offered the highest return of around 11%, but investment outflows during the month hit $ 30.2 million against inflows of $ 7.7 million.

In the first four months of FY22 – July-October – the outflows of the three investment options exceeded the inflows. The net outflow over the four months was $ 565.9 million compared to a net inflow of $ 304.4 million in the same period.

The largest outflow of $ 369 million was recorded on equity against a net inflow of $ 142 million in the four months. The leak severely damaged the stock market during this period.

Surprisingly, GDPs have also lost their appeal despite very high returns. BIP outflows amounted to $ 50.6 million compared to an inflow of $ 27.5 million in the four months.

Likewise, Treasury bill outflows were $ 146.2 million compared to $ 134.7 million in the same period.

Before the emergence of Covid-19 in March 2020, treasury bills and GDPs were hotcakes for foreign investors, but they quickly left the country as the pandemic began to spread across the world.

Domestic investors still have the largest investment in GDP, indicating the attractiveness of higher returns. Banks are the biggest investors in both newspapers because they easily find risk-free income.

Some bankers believe the lower inflows and higher outflows in government papers were due to uncertainties on the economy’s external fronts. They said that despite better foreign exchange reserves, the country was facing a destabilization of the exchange rate regime. Bankers said the destabilized exchange rate did not give confidence to foreign investors and they avoided risking their money.

They said that with a possible increase in interest rates, the papers could attract investors in the future, as Treasuries were a short-term opportunity to gain quickly.

Posted in Dawn, le 2 November 2021

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