Foreign corporates continued their selling spree today, net selling $6.2 million worth of Pakistani equities. Since September 1st, they have sold over $59.77 million, representing approximately 60% of their net purchases for the entire year up until August. This selling wave is largely attributed to the recently announced reclassification of Pakistan from a secondary emerging to a frontier market status, effective September 23, 2024, as per the FTSE Equity Country Classification framework. See this. and this.
Despite the significant selling by foreign corporates, the PSX continued to exhibit strong performance. This selling pressure has been largely absorbed by local mutual funds. As interest rates decline, fund investors have been shifting from money market funds to equities, providing a supportive environment for the market.
Interestingly, the foreign corporates' selling, driven by the market reclassification, has inadvertently provided much-needed liquidity to the market. Moreover, the replacement of foreign funds with local mutual funds is also advantageous for Pakistan's foreign exchange reserve position.
(1st October 2024)
