Karachi September 23 2024: Foreign investors were net sellers with worth selling of across most sectors in September, driven by FTSE rebalancing.
The Fertilizer, Oil and Gas, and Commercial Banks sectors experienced the largest outflows, while Technology and Communication stood out as the only sector with net positive foreign investments.
Overall, Pakistan equities saw a gross sell of USD 125 million worth of shares. However, a substantial gross buy of USD 88.2 million reduced the net sell to USD 37.1 million during the period from the beginning of September to the 20th.
FTSE Russell, a leading global provider of index and benchmark solutions, announced on July 3rd, 2024 that it will reclassify Pakistan from Secondary Emerging to Frontier Market (FM) status effective September 23rd, 2024.
“As per the latest available shareholding data from Bloomberg as of Jul 31st , 2024, shares worth US$53.7Mn of these 14 companies were held by foreign funds tracking the FTSE Emerging Market indices” states Foundation Securities in its research note.
“While we believe that funds tracking the FTSE Emerging Market indices would divest their shareholdings, inflows related to inclusion in the FTSE FM indices would counterbalance some of the selling pressure” the research note added.
The most pronounced impact was seen in the Fertilizer sector, which experienced a gross buy of USD 6.5 million but a significant gross sell of USD 22.6 million. This resulted in the largest net foreign sell of USD 16.07 million.
Commercial banks witnessed foreign buyers purchasing USD 9.6 million worth of stocks, while sellers offloaded USD 17 million, leaving a net outflow of USD 7.42 million.
Foreign activity in Oil and Gas sector also leaned towards heavy selling, with purchases of USD 14.8 million outweighed by sales of USD 22.2 million. The net sell figure stood at USD 7.4 million.
Cement sector saw foreign buyers purchasing USD 7.8 million, but this was overshadowed by heavier selling at USD 10.9 million, leading to a net outflow of USD 3.14 million.
Unlike other sectors, Technology and Communication recorded a net inflow of foreign investments. Despite a relatively balanced gross sell of USD 16.8 million, the sector saw net positive activity, with a small net buy of USD 0.58 million.
While all other sectors face small magnitude of net selling indicates limited exposure reduction compared to other sectors.
“We believe that bulk of the outflow related to the FTSE reclassification of Pakistan to FM would occur on Sep 23rd, 2024” states Foundation Securities research.
