KARACHI: The foreign investments in equity and treasury bills (T-bills) surged to $98 million in January, surpassing the peak of $65m in December 2023.

The latest data from the State Bank of Pakistan (SBP) showed that the inflows in equities totalled $67m during January under the Special Convertible Rupee Account (SCRA) which kept the market bullish during the month.

This was the second consecutive month for higher inflows in the stock market. In December 2023, the equity investment alone was $65m while the total inflows during the first half of the current fiscal year were $204.8m. With the inclusion of a $16m inflow in T-bills, the total surged to $222m under SCRA.

In January, the inflows for T-bills also increased to $30.6m indicating that the higher cut-off yield of about 21pc succeeded in attracting foreign investment.

Inflows under SCRA totalled $324m in first seven months of FY24

However, experts keenly watching the fluid political situation and troubled economy were not optimistic about the bullish inflows in the coming months. They said instead of making the situation clear, the general elections have produced more uncertainties, particularly regarding the formation of a new government and sustainability amid agitations in most parts of the country.

Bankers said the inflows under SCRA are highly encouraging for the country and signalling the potential for attracting more foreign exchange. They said the formation of a stable new government in Islamabad could provide a positive sign for the investors willing to earn huge returns from the equity market and T-bills.

According to the SBP data, the total inflows under SCRA during the first seven months of the current fiscal year were $324m — $277.2m for equity and $46.7m for T-bills.

Some experts said if the situation in the country does not improve, the entire inflows would leave the equity market as well as T-bills.

Pakistan had received up to $5 billion under SCRA for domestic bonds (T-bills and Pakistan Investment Bonds) before the emergence of Covid-19 in 2019. The foreign investors quickly withdrew over $4bn with the spread of the pandemic. Since then the country has not received any significant amount for the domestic bonds while the inflows for the equity market were also not significant.

Some bankers believe that the stable exchange rate for over two months is a positive sign for investors. The SBP and the government succeeded in managing the exchange rate which remained stable despite a lot of political uncertainties in the country.

The dollar exchanged hands at Rs282.23 in the open market on Saturday while it traded at Rs279.56 in the interbank market on Friday.

The inflows through SCRA supported the State Bank to maintain its foreign exchange reserves at $8bn.

Published in Dawn, February 25th, 2024