20000123

$43.1m outflown from stock market in 1999

HARIS ZAMIR

KARACHI: The stock market saw an outflow of $43.102 million from the foreign fund houses in 1999, mainly because of curbs on repatriation of sale proceeds, tussle between the government and private power producers and delay in release of funds from donor agencies.

According to statistics received from the Karachi Stock Exchange (KSE), foreign investors bought 294.260 million shares in 1999 worth Rs 5.076 billion while they sold 430.187 million shares valued at Rs 7.337 billion. Hence, net disinvestment in the year amounted to Rs 2.226 billion or $43.102 million.

These entities in 1998 bought shares worth Rs 14.930 billion and sold shares valued at Rs 14.242 billion, thus the net investment in 1998 was around Rs 688 million or $15.829 million.

The chronic issue, which dampened the investors mood, was the tussle between the government and private power, producers especially Hub Power Co. This throttled the foreign investment in the stock market and the KSE-100 index saw a low level of 942 points in January 1999.

"The economic situation of the country further derailed the investors' confidence. The widening of the trade deficit, fall in remittances and exports, revenue collection and agricultural output squeezed the growth of GDP which moved down to 3.1 percent in 1998-99 from 4.3 percent of 1997-98", a leading trader said.

The change of guard at Islamabad from democratic government to military regime also hurt the confidence of the foreign investors. Though, the stock market in the last three months has ballooned up sharply by over 500 points, still the foreign investors are reluctant to put their money into local bourses.

An analyst said the reduction in lending rates by upto 200 basis points, improvement in exports in the last one quarter, appreciation in revenue collection and phasing out of foreign exchange restrictions are the confidence boosting measures.

He hoped that by the end of second quarter of 2000, foreign investors would re-enter the rings and the stock market might see some fresh investment from these entities.