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Morning Briefing for Jan 18, 2012 – Standard Capital

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by January 18, 2012 Brokerage

Karachi: FDI falls by 63.6% in 1HFY12

The Foreign Direct Investment (FDI) continued to show negative growth of 63.6 % in the first half of the current financial year, with steep outflow of Foreign Portfolio Investment (FPI), State Bank of Pakistan (SBP) statistics said.

According to Standard Capital, the net FDI investment landed $386.6 million during July‐December 2011‐12 after $144.6 million outflow of capital was brought back by the foreign investors in the bonds and stock markets, which witnessed bearish trend on political uncertainty.

The portfolio investment recorded 165.3 % decline in July November 2011‐12 as compared with previous year’s $ 221.5 million figures. Foreign Direct Investment, on the other hand, has registered a decline of 36.7 % to reach $531.2 million in first half of the current financial year 2011‐12. FDI from developed countries have exceeded from developing states in the said period.

According to the statistics, the FDI from developed states is comparatively high to reach $411.5 million as compared with developed countries that invested $132.7 million in the first five months of the current financial year. Whereas FPI were also pulled back by $152 million substantially by investors of developed countries, whereas FPI witnessed surge of $9.4 million from developing nations in the July‐ December 2011‐12.

Foreign investment down by 64pc in 6 months
Pakistan received $386.6 million in foreign direct and portfolio investment in the last six months of 2011, a fall of 64 per cent from one year earlier, the central bank said on Tuesday. In the July‐December 2010 period, investment totalled $1.06 billion, a statement from State Bank of Pakistan said. Out of the total investment, foreign direct investment fell 37 % in July‐December 2011 to $531.2 million from $839.6 million in the final six months of 2010, the State Bank of Pakistan said.

Current account deficit swells to US$2.15bn in 1HFY12
The current account balance continued to show its negative growth, standing at $2.104 billion in July to December 2011‐12 due to the disparity between expenses and earnings of the country, State Bank of Pakistan (SBP) statistics showed on Tuesday. Surprisingly, the current account turned into surplus of $160 million in December 2011 due to which the overall deficit position was contained in the first half of the current financial year at $2.15 bn.

Rising debt to add economic miseries
Total debt of the country reached the level of Rs11.8 trillion by the end of 1QFY12 (Jul‐Sep11), and looks set to cross Rs12 trillion mark in the near term. In relative terms, debt to GDP ratio stays glued to 60 % The proportion of domestic debt in the total has been on the rise, and continues to stay over 50 % of total outstanding debt, with the rest financed through external sources.

With Pakistan’s economy facing a bundle of challenges, one such confrontation is associated with the rising level of debt especially from domestic sources, said a research report issued by a local brokerage house. The report observe that within the pie of domestic debt, portion of floating debt has increased substantially. Floating debt (comprising short‐term money market instruments) conventionally occupied average 39 per cent of the total domestic debt during last decade.

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