KARACHI, April 22: The trend has changed. Unlike in the past financial year the Swiss investors are no longer making a huge portfolio investment into Pakistan. Statistics released by the State Bank reveal that portfolio investment from Switzerland fell to a net minus $500,000 during July-March 2003-04. In the year-ago period portfolio investment from Switzerland was $30.8 million.

Portfolio investment has fallen in nine months to March 2004 also from various other countries - and volumes of withdrawals have been larger than that of Swiss investment. But what makes a negative portfolio investment from Switzerland rather more prominent is the fact that in the comparable period of last fiscal year Switzerland was the biggest portfolio investor of all.

Bankers say most of the Swiss portfolio investment has been into the stock market. Stock brokers also second this view. If this is the case then the net withdrawal of half a million dollars of Swiss portfolio investment needs some explanations.

"The Swiss investors might have booked capital gains on their previous investment and then made withdrawals," says the Karachi Stock Exchange chairman Arif Habib. What substantiates this view is the fact the stock market saw a boom during July-March 2003-04 and that it is quite natural for foreign investors to get out of the market when it is heating up.

KSE 100-share index has moved up from 3,433 points on July 1, 2003 to 5,107 on March 31, 2004. During this period overall portfolio investment saw a decline of $45.5 million. In the comparable period there was a modest inflow of $6.5 million portfolio investment into the country.

The profit-taking theory comes handy also in explaining this overall trend. The SBP statistics does not give the market-wise breakup of portfolio investment but historically stock market has been the key recipient of the same. That makes it easier for one to apply the profit-taking theory.

But the problem in applying this theory is that it makes it difficult to explain an inflow of $25.7 million in portfolio investment from the US and the UAE during July-March 2003-04.

"One can assume that the UAE-based non-resident Pakistanis came forward to invest in stocks in Pakistan when the market started to move up," says Mr Habib. "That seems true though partly also in case of the US." The US made $16.4 million portfolio investment and the UAE $9.3 million into Pakistan in nine months to March 2004. In the year-ago period, the two countries had invested only $600,000 and $1.6 million respectively.

Some stock brokers see higher portfolio investment from the US in the context of overall larger inflows from that country in the shape of home remittances and general transfers of money after 9/11. "The myth of a nest abroad was shattered after 9/11 when all Muslims were looked upon suspiciously in the West particularly in the US," says a former chairman of KSE Yasin Lakhani.