KARACHI, March 1: The proclamation of state of emergency in the country last year proved ‘fatal’ for foreign investments in the shares market, while elections brought a vital change, as for the first time after the emergency, the portfolio investment showed its presence on the positive side.

The cumulative inflows during February were to the tune of $154 million, which represented an entirely different situation from the previous three months after the imposition of emergency on Nov 3, 2007.

The fiscal year 2007-08 was not attractive for foreign investors in shares trading, as portfolio investment in the first quarter (July to September 2007) could hardly reach $57.6 million, much lower than $120.6 million in the corresponding period of last year. However, foreign investment in shares trading crossed $250 million in October 2007.

The situation had changed after the imposition of emergency which drained out entire investment within a month.

The State Bank on Saturday reported an inflow of $154 million during February which changed the overall collective investment, from the negative to the positive i.e. $93 million during the first eight months (July-February) of the current financial year.

Research analysts said the change came as a result of peaceful general elections. “First, the investment came when it was definite that general elections will be held on Feb 18 and then the inflows picked up pace after peaceful elections,” said an analyst.

The country’s foreign direct investment increased during the last seven months, but the growth was much lower, because of heavy outflow from the portfolio investment.

Compared to $669 million portfolio investment during July-January 2006-07, the investment was negative which remained at $21 million during July- January 2007-08.

This heavy downfall pushed the total foreign investment to a negative 34 per cent despite the fact that foreign direct investment (FDI) was up by 7.9 per cent during the same period.

Analysts said the improvement would send signals of a better image of the country which would be helpful to sell the GDRs (Global Depository Receipts) in the international market.

They said it would also help restart the privatisation process.

Researchers expressed the hope that if there was successful transfer of power, both at the centre and in the provinces, the foreign investment might see a sharp upward trend in the coming months.

Analysts believe that the country was in the dire need of foreign exchange inflows, especially in the wake of record high oil prices and ever-widening trade deficit.