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KARACHI: Foreign inflows into domestic bonds suddenly jumped in May and were more than double those in the equity market, while the total investment in T-bills in FY24 surpassed that in the booming equity market.
The data issued by the State Bank of Pakistan (SBP) on Friday showed that foreign inflows in treasury bills in the first 10 days of May were $35.6 million compared to $16.5m for the equity market.
The return on T-bills is still very high since the policy rate was kept unchanged at 22pc despite a significant deceleration in inflation from 37pc to 17.3pc in April. It could be in the range of 13-14.5pc for May.
“As they (foreign investors) believe the rate of return on T-bills exceeds the risk of currency depreciation, they would be able to make money on the trade,” said Samiullah Tariq, Head of Research and Development at Pak-Kuwait Investment and Development Company.
The data also reveals that the outflow from the equity market has been much faster. The total inflows during FY24 were $614.7m—$390.4m in equities and $224.2m in T-bills.
However, the equity market’s outflow during the same period was $294.8m compared to $31.6m from T-bills. The presence of foreign investment in T-bills shows the higher earnings from domestic bonds.
Published in Dawn, June 1st, 2024
