KARACHI – Foreign portfolio investment (FPI) in Calendar Year 2010 at Karachi Stock Exchange currently stands at $2.8 billion, which is around 7.5 percent of total market capitalisation, compared to $1.9 billion (5.9 percent of the market capitalisation) last year.
Despite the devastating summer floods in the country, the high interest rate and imposition of Capital Gains Tax (CGT), the benchmark KSE-100 Index gained 26.2 percent in Calendar Year 2010 to date. The bourse outperformed most of the asset classes like crude oil, foreign exchange, money market instruments, except silver and gold, which outperformed KSE-100 Index by 0.9 percent and 48.5 percent, respectively.
This phenomenal performance mainly came as result of foreign portfolio flows of $ 509 million and an anticipated annual growth of 13 percent in earnings. The scrip of OGDC (24.50 percent weightage in the Index) jumped by 56 percent during 2010, adding approximately 1,000 points to the KSE-100 Index growth of 2,461 points.
Strong earnings growth and deep valuation discount offered by the local bourse in comparison to regional markets attracted strong inflows, evident from a 48.9 percent annual increase under SCRA held securities.
The increase in foreign ownership proved instrumental in building the investors’ confidence at the local level and pushed the benchmark KSE-100 Index upwards. Foreign inflows and double digit (17 percent) earnings growth will remain essential to driving the market forward in 2011. Given the continued trends of foreign investment converging on emerging markets, with KSE trading at a steep PER discount of 48 percent against its regional peers, the bourse is expected to tap further foreign inflows and further cement its position.
