Foreign investors pulled out more than $350 million investment from the Treasury Bills and Pakistan Investment Bonds (PIBs) during the period of July to December 2021.
According to the State Bank of Pakistan (SBP), the outflows in hot money climbed to $352 million in the second half of 2021.
The investors redeemed an amount of $268 million from T-Bills and $82 million from PIBs during the said period but they did not continue investments in the same values in these bonds despite improving profit rates with a revision of policy rate.
Investors from UK, USA, UAE, Luxembourg, and Singapore made the divestment in T-Bills. In PIBS, investors of the UK, USA, and Luxembourg redeemed their profits.
During the period, investors from these countries also made investments of $265 million from July to December 2021, according to SBP data.
Over $1 Billion Outflow in Portfolio Investment
The outflow of foreign portfolio investment in the equity market surged to $675 million during the period of July to December 2021. The shares market also recorded inflows of $312 million in the same period.
The overall market participation by the foreign investors at Pakistan Stock Exchange (PSX) witnessed a mixed trend but the trend of divestment was more prevalent. Hence, the overall foreign portfolio investment from the equity market and government bonds recorded an outflow of over $1 billion in the said period. On the other hand, the net foreign portfolio investment (FPI) recorded an outflow of $440 million from the equity market.
The outflow of FPI can be attributed to concerns on the macroeconomic front during 1HFY22. The high current account numbers, inflation, devaluation of PKR by 11 percent, uncertainty on IMF and resumption of monetary tightening coupled with recurring waves of COVID-19 remained key concerns. Hence, we saw outflows in portfolio investments of foreigners, said Sana Tawfiq, a researcher at Arif Habib Limited.
We believe, with macros improving going forward, especially in the latter part of CY22, this should reignite the interest of foreign investors. Also, rates being offered on our bond portfolio are lucrative and should help attract foreign inflows, she added.