20000309

Govt efforts building confidence

$40m flow into

Karachi bourse in

past three weeks

HARIS ZAMIR

KARACHI: The Karachi Stock Exchange (KSE) saw a renewed way of foreign investment of $40 million-42 million in past three weeks as the central bank allowed repatriation of earnings made through sale of shares, and the government gained the confidence of local and foreign investors.

''The clearance of pending dues of foreign investors worth about $38 million paved the way and acted as a confidence booster,'' Arshad Arif, head of research at ABN AMRO Securities in Karachi said.

The State Bank of Pakistan in January allowed foreign investors to repatriate overseas money from the sale of shares. It said it would entertain all future applications from foreign investors on a prompt basis.

Analysts said around $20 million were in the pipeline, and hoped this would be invested soon. All the investment was made by UK-based fund houses in the local bourses.

The political stability, austerity measures and the government efforts to privatise state-run companies further improved the sentiment and market saw fresh foreign buying in the Pakistan Telecommunications, Hub Power, and gas and oil companies, Arshad said.

''The stock market since the change in government, on October 12 rose by 61 percent to 2013.45 on February 23 mainly because of local participation,'' Arif Habib, chairman, Karachi Stock Exchange said. The buying from local financial institutions and brokerage house boosted the sentiment of foreign investors, he said.

The buying was unabated as the government took a number of steps including reducing the lending rates, privatisation and deregulation of oil and gas sector, and its keenness to resolve the tariff dispute with private power producers, he said.

In addition, the bumper cotton crop this year improved the earnings of textile companies on the share market. The increase in textile goods will boost exports from the country for the year ending June, Arif said.

According to one analyst if the government continues with its reforms policies and meets the International Monetary Fund targets, there exists a possibility of more comprehensive external debt rescheduling in 2001.

He added that a key area of focus here was likely to be the size of the budget deficit in the fiscal year 2000. The original target agreed with the IMF was 3.3 percent of the GDP, but now the government was trying to renegotiate with the IMF to raise it to 4.0 percent. This, he said, is in order to focus on poverty alleviation. However, Pakistan may be required to sign the CTBT in return for a larger and longer term debt restructuring. If such a scenario unfolds, sovereign credit ratings could rise as the risk perception for Pakistan improves, especially as 2001-02 is the peak period in terms of debt servicing obligations after which these begin to trend lower.