KARACHI: Pakistan witnessed a substantial increase in foreign investment through the stock market in the last three weeks after international corporations and overseas Pakistanis brought $19.9 million into the country, reflecting improved investor confidence in the wake of the Feb. 8 polls, as confirmed by financial experts on Friday.
After months of uncertainty surrounding the general elections, Pakistan held the polls last month, though their conduct and outcome led to widespread speculations of vote fraud. The split mandate in the electoral contest was followed by political negotiations that led to a power-sharing agreement between Bilawal Bhutto Zardari’s Pakistan Peoples Party and the Pakistan Muslim League (PML-N) of three-time prime minister Nawaz Sharif.
Despite the allegations of rigging and ensuing political protests, the elections brought clarity to Pakistan’s capital market, which was reflected in the bullish sentiments including the rise in foreign equity investment.
Foreign corporations invested around $18.5 million in the equity market, while overseas Pakistanis bought shares worth $1.4 million after Feb. 8. In the last three weeks, the net investment amounted to $19.9 million, according to the National Clearing Company of Pakistan Limited (NCCPL), an institution that provides clearing and settlement services to the Pakistan Stock Exchange (PSX).
“The surge in the foreign portfolio investment reflects the clarity in the market after holding of general elections,” Khurram Schehzad, CEO of Alpha Beta Core, a financial advisory firm, told Arab News.
In February 2024 alone, the foreign investment amounted to $25.7 million as compared to the $8.5 million recorded in the corresponding month last year.
During July to February 2024, net foreign investment stood at about $59.6 million in equity market as compared to $16.3 million recorded during the same period in 2023.
Schehzad said the market would further consolidate after the formation of the next government.
Discussing the development, Ali Nawaz, CEO of Chase Securities, described the rise in foreign investment in the country’s equity market as “promising.”
“This can be attributed to factors like improved economic stability, successful International Monetary Fund loan agreement, and potentially positive policy changes anticipated under the new government,” he told Arab News.
“Once a stable government is formed, clearer economic direction and potential reforms will further incentivize foreign investors, making Pakistan’s stock market even more attractive,” he added.
The country’s equity market has witnessed a strong rebound during the latter half of the previous month, after the vote fraud allegations.
The stock market closed weekend trading session at 65,325 points after easing of political uncertainty. The formation of a coalition government at the center is expected to keep the investor sentiment positive.
“Stocks closed higher amid reports of inflation falling to 23 percent for February 2024 and the National Assembly session held to form the new government,” Ahsan Mehanti, CEO of Arif Habib Corporation, commented.
Mehanti said the American assurance to support Pakistan in its effort to break free from the vicious cycle of debt and international financing also played a key role in keeping the bullish sentiments alive at PSX.
Matthew Miller, spokesperson of the US State Department, noted on Thursday Pakistan’s economic stability was crucial to the long-term strength of its government.
“Pakistan’s new government must immediately prioritize the economic situation because the policies over the next several months will be crucial to maintaining economic stability for Pakistanis,” he said while responding to a question about the political situation of the country.