KARACHI: The foreign investors remained on the selling side and withdrew $37 million from the local equity market during the month of January 2024. This was highest net selling by foreigners at Pakistan Stock Exchange after 12 months.
To recall after IMF deal at June 2023 end, Pakistan saw renewed foreign portfolio interest in local bourse. In last six month (July to December 2023) foreign corporates bought shares worth $239 million and sold $164 million at PSX resulting in net buying of $75 million.
Foreign corporate turned net buyers in 2023 after three years and PSX saw highest inflows after eight years, Muhammad Sohail, leading analyst and CEO of Topline Securities said. IMF loan, stable Pak Rupee and strict measures taken by the caretaker government played a major role in this inflow at PSX.
However, the recent above average selling of $37 million in January 2024 has raised some concern amongst investors especially when market was waiting for a pre-election rally, he added.
“As per our channel checks, leading global ETF has been biggest seller in the market,” he said.
On January 19, 2024, Global X ETFs, the New York-based provider of exchange-traded funds, announced the scheduled liquidation of the 19 ETFs including Pakistan ETF, based on an ongoing review process of its product lineup to ensure it meets the evolving needs of its clients.
At end of December 2023, this ETF had investment of $33.23 million in Pakistan. And now based on January 31, 2024 stats this ETF holding in Pakistan has come down to $2.1 million. Based on these numbers, the selling by this fund is almost over.
Thus, this reduction in size of this ETF has been a major portion of foreign corporate selling seen at PSX in last few weeks.
“We believe PSX recovery will resume post this selling pressure in the year 2024. We expect benchmark KSE-100 total return index to reach 75,000 by December 2024”, he said. However this is based on current low PE multiples without assuming any re rating amid high risk of debt sustainability, he added.
“We may also see a post election rally in line with historical trend.”
The benchmark KSE-100 Index declined by 0.71 percent on month-on-month basis during January 2024 and this decline can be attributed to hefty selling by foreign corporate, regional conflict where Pakistan and Iran both carried out attacks on each other’s territory – conflict was later toned through diplomatic ties and increase in political noise in the background of upcoming election on February 08, 2024.
Smooth transfer of power to new government after elections, new long term funding program from IMF and expected fall in interest rate will be the key drivers of equities in 2024, he noted.
Pakistan market is currently trading at PE of 3.7x based on 2024 estimated earnings. This is far lower than last 5 year and 10 year average PE of 6x and 8x respectively. This is even lower than countries that have defaulted on external debt.
Copyright Business Recorder, 2024
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