KARACHI, April 24: Pakistani bourses have attracted investment mainly from Switzerland in the first nine months of this fiscal year.
According to the latest State Bank statistics (posted on its website) Pakistan attracted $30.8 million worth of net portfolio investment from Switzerland between July/March 2002/03. But investors of other countries emerged as net sellers of Pakistani stocks during this period the aggregate portfolio investment in the said period stood at $6.5 million.
Some stock brokers including two former heads of Karachi Stock Exchange said the major chunk of the Swiss investment represented reverse flight of the ill-gotten money placed there in good old days. No senior official of the present KSE management could be contacted immediately. But another former chairman Mr. Arif Habib said “it is difficult to label the Swiss investment as reverse flight of ill-gotten money.” He said such a judgment could only be passed when the investors could be identified and their source of income could be ascertained. “Since the State Bank has much better access to such information (because of the involvement of custodian banks in portfolio investment) can do this,” he said when reached by Dawn over telephone.
He said since the investors are identified not only with stock brokers and central depository company but also with custodian banks and SBP “it is difficult to bring in ill-gotten money in stock market.” He also pointed out that the investors are also normally exposed to the management of the companies in whose stocks they invest. But he shared the common perception that the major chunk of the Swiss investment must have come from non- resident Pakistanis there. He also did not rule out the possibility that some Pakistanis who had earlier placed money in Switzerland had brought it back. “But you cannot label it as ill-gotten money unless you know that.”
Unlike Mr. Habib some stock brokers including two former KSE chairmen believe that bringing in ill-gotten money into stock market is not that difficult. “There are always front-men there,” says one of the two former heads of KSE. “When you want to bring in ill-gotten or tax-evaded money you do not do it in your name. You can make arrangements with the fund managers of the country where you have the accounts,” he said.
In fiscal year 2001/02 also Pakistan had attracted a hefty $23.2 million portfolio investment from Switzerland and $20.6 million from Hong Kong. These inflows came in despite the fact that investors from other major countries including the US and the UK and the UAE had pulled out from Pakistani bourses. That was why aggregate portfolio investment stood at minus $10.1 million that year.
In the first nine months of this fiscal year too the UK-based investors pulled out $11.3m from Pakistani bourses and net inflow of portfolio investment from the US and the UAE totalled only $0.6m and $1.6m. Investment from Hong Kong also turned negative with $5.2 million outflows recorded in the first nine months of this fiscal year.
The above-quoted statistics are compiled by the central bank on the basis of the information received from custodian banks. These may not necessarily tally with the data gathered by the management of the stock exchange whose source of information is the disclosure made by stock brokers.
