October sees accelerated outflows from equity, T-bills, PIBs

Published November 2, 2021
A file photo of a person holding US dollar bills. — Dawn/File
A file photo of a person holding US dollar bills. — Dawn/File

KARACHI: The outflow of foreign investment in equity, treasury bills and Pakistan Investment Bonds (PIBs) during October was almost three times higher than the inflow reflecting the decreasing interest of investors in most attractive opportunities.

The cumulative inflow during the month was $58.5 million while the outflow jumped to $178.58m; the cumulative net outflow during October was $120m.

However, October proved the worst month for the investment in equities, T-bills and PIBs during the four months of the current fiscal FY22.

The highest outflow during October was noted from equity as the investors withdrew $134.5m against an inflow of $34.2m. The outflow from treasury bills was less than the inflow. The inflow in T-bills during the month was $16.6m against an outflow of $13.8m.

The PIBs noted a setback since it offers highest return of about 11 per cent but the investment outflow during the month rose to $30.2m against an inflow $7.7m.

During the first four months of FY22 -- July-Oct -- the outflows from all three investment options were higher than the inflows. The net outflow during the four months was $565.9m against a net inflow of $304.4m in the same period.

The biggest outflow of $369m was noted from the equity against a net inflow $142m during the four months. The outflow severely damaged the equity market during this period.

Surprisingly, the PIBs also lost attraction despite offering very high returns. The outflows from the PIBs were $50.6m against an inflow of $27.5m during the four months.

Similarly, the outflow from T-bills was $146.2m against an inflow of $134.7m during the same period.

Before the emergence of Covid-19 in March 2020, the T-bills and PIBs were hot cakes for the foreign investors but they quickly left the country as the pandemic started spreading across the globe.

The domestic investors still have the biggest investment in PIBs indicating the attraction of higher returns on it. Banks are the largest investors in the two papers as they find easy to earn risk-free income.

Some bankers believe that the low inflow and higher outflow in the government papers were due to uncertainties on the external fronts of the economy. They said despite better foreign exchange reserves, the country had been facing destabilisation of exchange rate regime. Bankers said the destabilised exchange rate did not give confidence to foreign investors and they avoided risking their money.

They said that with possible increase in interest rate, the papers could attract investors in future since the T-bills were short term quick-earn opportunity.

Published in Dawn, November 2nd, 2021

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