The outflow of "hot money" has picked up momentum and divested amount reached about one billion dollars.
According to latest data released by State Bank of Pakistan (SBP) on Thursday, cumulatively foreign investors have divested some $972 million from their investments in the government securities including Market Treasury Bills (T-Bills) and Pakistan Investment Bonds (PIBs) during this fiscal year (1st July 2019 to March 11, 2020).
The Special Convertible Rupee Account (SCRA) data showed that some $938.923 million was divested from T-Bills and $33.282 million from PIBs during this fiscal year. The major selling of $896.328 million was made by the UK-based investors through T-bills. While the remaining investment in the government securities was withdrawn by investing from the US, Bahrain and Ireland.
Total divestment from T-bills during the first eleven days of this month stood at $625 million, including $251 million on March 11, 2020 alone.
Commenting on the recent trend of portfolio investment, Faisal Mamsa CEO of Landmark Investment said that the global markets have disintegrated due to panic and no one can take price risk right now. Therefore, foreign investors are offloading their portfolios irrespective of asset class of geography, he added.
He mentioned that recent volatility in exchange rate is because of massive outflow of foreign investment in T-bills. "Most of the damage done to the Rupee was due to distress selling of government securities by foreign traders," he added.
"We are expecting the outflow of investment in government securities will further get momentum in coming days," he added.
Mamsa said that central banks of developed countries are already proactive and aggressively cutting the interest rates to counter the coronavirus economic threat, while State Bank of Pakistan (SBP) will announce its Monetary Policy Statement next week. Considering this situation, the SBP too should take an aggressive approach and intervene immediately reduce interest rates by at least 200 basis points (bps), he added.
According to him, a survey done by Tresmark of treasuries of commercial banks shows that only 60 percent of respondents expect a 50-100 bps rate cut, while the remaining are expecting either anything under 50 bps or no change.
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