The volume of Foreign Portfolio Investments (FPIs) at the country's stock exchanges will be announced on day-to-day basis from March 5, 2008. Securities and Exchange Commission of Pakistan (SECP) Chairman Razi-ur-Rehman while speaking at a press conference here on Monday said.
The daily basis announcement will be made by the National Clearing Company of Pakistan Limited (NCCPL) and the report would also be available at the Karachi Stock Exchange (KSE) website. He said foreign investors can freely trade in the shares quoted on the stock exchanges in Pakistan and debt instruments inter alia Treasury Bills, Federal Investment Bonds (FIBs), TFC's, etc.
For this purpose, foreign investors are required to open up a Special Convertible Rupee Account (SCRA) with any authorised dealer in Pakistan and this account needs to be fed by remittances from abroad.
Accordingly, by monitoring the movements in SCRA one could keep track of foreign investors' activities in local stock market and debt capital market. Consequently movement movements in SCRA do not represent the extent of buying/selling being carried out by foreign investors. It is to be noted that a sale/ divestment transaction by a non-resident is not recognised as an outflow from the SCRA unless it eventually flows out of the SCRA and drains out of the Pak economy.
The SECP has, therefore, decided to formulate a strategy to track the non-residents investors' activities in the local capital market and disseminate this information on daily basis. Utilising the Universal Identification Number (UIN) of each foreign investor, the SECP and the NCCPL shall determine the amount of foreign investment made in the market. Based on an analysis of the information received from CDS, regarding shares held by foreign investors, other than long-term FDI, as at February 13, 2008, and adjusting the same with the net inflow/outflow (represented by net buying, selling) each day up to February 29, 2008, we have determined the extent of foreign ownership in the local market. The results are quite revealing.
Total investment in the local stock market by foreign portfolio investors as at February 29, 2008 was $4.8 billion and represents 25 percent of the free float of the scrips in which the FPls are invested, (this exclude GDRs and is based on February 29, 2008 closing rates).
Only in February 2008, the net inflow of FPIs stands at $123.4 million. This $4.8 billion FPIs represent 25 percent of the free-float of the scrips in which the FPIs are invested. There are as many as 327 favourite stocks for the foreigners, whereas 49 percent of free-float of their holding is seen only in 11 companies.
These companies included Atlas Engg. New Jubilee Life Insurance, Faysal Bank, Premium Textile, OGDC, First Capital Mutual Fund, UTP-Growth Fund, Habib Metropolitan Bank, Kapco, Atlas Funds of Funds and American Life Insurance.
Making the share businesses more transparent the SECP always accords top priority and for this purpose the Commission is performing its duties, he said. The NCCPL would make announcements on daily basis in collaboration and consultation with the CDS and with the help of Universal Identification Numbers (UINs) allotted to overseas investors, he added.
FIs Margin System: The financial institutions margin system was implemented by the NCCPL from November 5, 2007 that resulted in reduction in margin demand for members (KSE) of approximately Rs 3 billion on an average per day. Moreover, this step also relieved in respect of capital adequacy for members of trades worth approximately Rs 23 billion on an average per day, he said.
The SECP has also developed an automated system to transfer the benefit of corporate announcement in CFS transaction directly to the CFS financees. The Commission is going to launch guidelines for issues and offer of shares through book building very soon.
Moreover, it is planning to penalise and punish the non-authorised dealers (equity market), as the Commission has detected some three cases of fake dealers in 2007-08. These fake dealers are found cheats with the genuine investors. Only those dealers would be allowed to work in the market, who would be on SECP list otherwise all others would be treated as illegal equity market dealers, he added.