KARACHI: The foreign investment in the domestic bonds flew to the safe havens on a large scale during the first two weeks of this month reflecting the uncertainty on international as well as domestic fronts.

The latest data of the State Bank of Pakistan (SBP) showed that the outflows from Market Treasury Bills (T-bills) and Pakistan Investment Bonds (PIBs) were $165.7 million against a net inflow of just $7.4m.

These massive outflows indicated that the panicky foreign investors withdrew their investments from the country affected by the very high oil prices.

“Oil prices have risen sharply due to the Russia-Ukraine war. It’s not only Pakistan but all the countries are facing the same situation,” said Samiullah Tariq, head of research at Pak-Kuwait Investment and Development Company.

The serious imbalance in outflow and inflow in equities was also visible. The inflow of foreign investment in equity in 14 days of March was $7.27m while the outflow swelled to $42.37m.

T-bills did not receive a single dollar this month so far but saw an outflow of over $63.1m. Similarly, the inflow in PIBs was $0.154m while the outflow was $102.598m.

The entire inflow of $104.3m in PIBs during the current fiscal FY22 left the country in 14 days of March.

In T-bills, the inflows during FY22 totalled $191.8m against outflows of $395.2m. Equities saw a sharper outflow of $753.9m against an inflow of $341.4m till March 14.

Investors and researchers believe that the Russian war against Ukraine has affected countries dependent on oil imports to meet their energy requirements as skyrocketing crude prices touched as high as $140 per barrel.

“Now the oil prices are coming down which means the situation could change in coming weeks or months,” said Mr Tariq, adding that the foreign investors usually see the situation through global views. He, however, did not believe that the current political turmoil has any significant impact on foreign investment in domestic bonds.

The data shows that the total inflows in equity, T-bills and PIBs during FY22 were around $637.7m while the outflows were $1.364 billion, showing a net outflow of $726.7m.

Domestic bonds and T-bills attracted $3.5bn from foreign investors as the country was offering better returns compared to a global trend. However, within three months of the emergence of Covid-19 in Pakistan, most of this foreign investment left the country.

Published in Dawn, March 16th, 2022

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