Portfolio inflows set new trend

[LahoreEstate]

KARACHI: Foreign portfolio investment suddenly picked up in August, reflecting both the rising attraction as well as political stability for investors.

The highly sensitive portfolio investment noted an inflow of $93 million during August while net inflow was 59 million which was highest since financial year 2008.

The political and law and order situation in the country had been a hurdle in inflows despite attractive offers made by the market.

During 2008-09, the portfolio investment was negative while the country witnessed net outflow from portfolio investment as of $1.053 billion against the inflow of $40 million of the preceding year 2007-08.

Despite net outflows from the market, the foreign direct investment (FDI) remained intact with a decline of 31 per cent in 2008-09. However, fall of portfolio investment presents a varied picture of investment climate of the country.

Analysts said improvement in the portfolio investment would help build a better picture of the country as well as investment climate.

They said it also reflects that the country did not receive outcome of the financial crisis in the developed economies where severe situation still persists and recovery was far from reality.

Some analysts pointed out that 90 per cent of the portfolio investments were coming from the US which means that the market was still not attractive for diversified global investors.

According to latest data of the State Bank issued on Friday, US invested $66 million in August while outflow was $16 million making the net inflow as $50 million.

Analysts said that out of $59 million, over $50 million inflows were from US which showed that only a few countries found Pakistan attractive for portfolio investment. FDI situation is also the same since the US was the biggest investor in the country in the fiscal year 2008-09. The inflow from US fell by 33 per cent to $875 million from $1.309 billion recorded during the preceding year.

The only good news was that remittances sent by overseas Pakistanis rose by 20 per cent despite a difficult internal situation which hampered both FDI and portfolio investment. But record remittances last year helped improve country’s image.

The government and the State Bank last week took an initiative to boost remittances by offering a number of incentives and facilitating transactions with a hope to double remittances in the next three years.

http://www.dawn.com/wps/wcm/connect/dawn...rend-za-02