PAKISTAN: Foreign investors pull out of market

14 August 1998
News

Foreign investors withdrew Rs 95.9 million ($1.9 million) from the Karachi Stock Exchange (KSE) in the first half of 1998. Most of the capital was withdrawn in May and June after Pakistan conducted its first nuclear tests.

Foreign investors sold equities worth Rs 6,828.2 million ($138.4 million) in the first half of 1998 and purchased stock worth Rs 6,732 million ($136 million). Over half of the selling occurred in May and June, which saw net foreign investment outflows amount to Rs 787.3 million ($16.1 million). The decline in foreign interest was in stark contrast to the first half of 1997, when the market was boosted by net inflows of some Rs 156.3 million ($3.2 million).

Analysts say that the retreat of foreign investment was due mainly to Pakistan's nuclear tests, which resulted in the imposition of international sanctions on the economy and saw restrictions placed on foreign currency accounts as part of attempts to avert a capital flight. The KSE was also hit by the independent power project controversy, which caused unprecedented unloading in energy shares, especially in Hub Power Company, the market's second most valuable entity.

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