March 28, 2007	Wednesday	Rabi-ul-Awwal 8, 1428

KARACHI, March 27: Top twenty companies listed on the Karachi Stock Exchange (ranked by market capitalisation) have already unfolded plans to invest about $6.4 billion in the next four years.

Does that reflect long-term confidence in the country and economy? May be — at least up to this point in time. Corporates are probably putting in more money in horizontal and vertical expansion of their units now than in the last five years.

But due to the recent street hullabaloo, investors are biting their finger nails, lest some of those companies decide to put their plans on the hold.

Stock market listed companies are as few as 655 and as everyone knows; two-thirds of them are either dead or dying. So how about the non-listed companies, the figures of which runs over 40,000?“The investment intentions of large non-listed corporates (including new foreign investors) are even more impressive,” says Ahsan Chishty, analyst at BMA Capital. Estimates vary from $54 billion to $73 billion over the next 4 years. Some part of those plans was reflected in overseas investment flows during the current calendar year.

Foreign investment has been a significant portion of total investment in FY07, which investors hope to lead to the government’s goal of 7 per cent GDP growth for the current fiscal to end-June 2007.

Foreign direct investment (FDIs), which in July-Feb 2007 period stood at $2,971m against $1,522 million same period last year – represented an increase of 95.2pc year-on-year. Domestic investment has also taken a significant leap. Public investment, targeted at close to USD6bn, stood at USD2.4bn in the first six months of the financial year.

“Private domestic investment is harder to gauge given the extent of under-reporting of balance sheets by SME’s in the country,” says the analyst.

In the share of fixed investment advances, which constituted 21 per cent of total banking sector stock in September 2006, against 21.6 per cent in December 2005, the fixed investment advances taken by SMEs have remained steady at 1.7 per cent.

An interesting development in the current fiscal year has been the rising incidence of portfolio investment as a percentage of total foreign investment. Since 2001, FDI has constituted almost 89pc of total foreign investment.

In contrast, portfolio investment in the July-Feb FY07 period stood at $1,649 million, representing 35.7 per cent of total foreign investment. But as significant portion of that amount emanates from the Global Depository Receipts (GDR’s) of OGDC and MCB Bank – which aggregate to $900 million, the actual component of ‘hot’ money flows was still low at 16.2 per cent of the total foreign investment.

After a dismal 2006, when the KSE provided a pittance of about 3 per cent return on equity investment, stock strategists are confident of a good year (2007) given the low valuations of stocks and alluring emerging markets.

Nothing can be as risky as investing in equities and overseas fund managers would have to be convinced of a greater potential for higher returns in the country’s stock markets over their risk perceptions. Prime Minister Shaukat Aziz is at the moment using his banking skills in Hong Kong to lure foreign investors to Pakistan for both business and investment.

Addressing business community at the Hong Kong General Chamber of Commerce he talked about investment friendly and consistent economic policies being pursued by Pakistan and the level-playing field that he said was “available for all local and foreign investors in all fields”.

One may have no truck with that, but his assertion that per capita income in Pakistan has increased to $846 (which translates to Rs50,760 per head) may have been taken with a pinch of salt by some members sitting at the breakfast table with the PM in Hong Kong on Tuesday morning!