Foreign selling continues at the Pakistan Stock Exchange (PSX) as foreign investors sell stocks worth over $200 million in the current calendar year to date. The apparent driving factor for the selling is the volatility in the rupee-dollar exchange rate and the downgrading of the bourse by the MSCI. Some of the major sellers at the PSX were foreign institutions. As per data from the National Clearing Company of Pakistan Limited’s (NCCPL) shares worth $239.26 million have been sold by foreign institutions since January 1, 2021.

Foreign individual investors and overseas Pakistanis were the net buyers of stocks of listed companies worth $2.88 million and $32.68 million respectively.

The stocks sold by foreign investors as well as local banks, insurance companies, and brokers were purchased by local individual investors. They bought shares worth $206.47 million, almost equal to the $203.74 million worth of stocks offloaded by foreigners. On the other hand, local companies have purchased shares worth $51.55 million since January 1.

Sector-wise, the majority selling by foreign institutional investors was observed in local banks, stock sold was worth $81 million, followed by oil and gas exploration firms at $42 million.

Fertilizer stocks worth $17.23 million were also sold at the PSX in the current year.

Telecom stocks worth $28.55 million and cement sector stocks amounting to $24.63 million were also purchased at the PSX.

Foreigners have remained net sellers at the PSX for the second consecutive year selling stocks worth a net $571.49 million during 2020. Foreigners also purchased stocks worth $55.75 million in 2019.

Head of Research Pak-Kuwait Investment Company Samiullah Tariq said, “They purchased stocks in 2019 after the return of sustainability to the rupee-dollar parity.”

Foreigners sold stocks globally in 2020 in order to keep cash in hand to deal with the pandemic.

In 2021, MSCI downgraded PSX to Frontier Markets (FM) Index resulting in foreign investors offloading holdings. MSCI had proposed the reclassification of PSX into FM from Emerging Markets (EM) in June and after consulting investors on the subject the index announced in September the downgrading of the local bourse with effect from December 1, 2021.

Tariq said, “Accordingly, the global investors, who had invested in local companies when PSX was part of the Emerging Market Index (2017-2021), are now selling stocks compared to nominal sales by them in the first four to five months of 2021”.

On top of that, foreign investors decided to sell local stocks as they witnessed a return of volatility in the rupee against the US dollar since May 2021 along with structural imbalances predominantly on the external front such as broadening trade and current account deficits, rising fiscal deficit and worsening balance of payment issues.

The story was filed by the News Desk.
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