LAHORE - The country’s market capitalisation has now reached $44.8 billion of which free float is $11 billion, thanks to net foreign buying, as foreigners hold about 30 per cent of the free float, one of its highest level.

Capital market experts said that currently, foreigners own $3.2 billion worth of Pakistani shares (excluding foreign sponsors holding). Although the number is lower than the peak levels of $5.1 billion in April 2008 but at that time foreigners’ holding was 24 per cent of the free float.

“Foreign shareholding in Pakistan stocks is rising faster than the market. This is evident by the fact that in relative terms foreigners’ holding is at one of its high level in spite of security issues, weak macro economy and declining local currency,” observed an expert from Topline securities. He noted in a report that besides normal inflow of funds to Emerging and Frontier markets, cheap valuations and vibrant rural/informal economy are key factors attracting foreign fund managers towards Pakistan. The other important question that people are eager to know is which stocks foreigners prefer. In order to gauge that, the experts said that $1.1 billion worth of OGDC, Pakistan’s largest Oil and Gas Exploration firm, is owned by foreigners. Currently, only 15 per cent of the company’s free float is available for local investors, as foreigners have gathered approximately 540 million shares of the company’s free float. OGDC that has a market capitalization of $8.7 billion and free float of $1.3 billion, only $200 million is with local investors. MCB, one of the foreigners’ favorite banks, ranked second with $300-325m being owned by them. Another explorer, PPL also remained foreign investors’ favorite as they hold $300mn, according to estimates.

Foreigners prefer stocks with large market capitalization and having decent liquidity and float. Top 3 stocks make more than half of their stake in Pakistan bourse. With absence of quality listing of bigger companies in the past few years, this concentration of foreign holding in selected stocks with decent float is increasing.

With remittance growth as the prime stimulant, real private consumption grew by 11.1 per cent in FY12 as against 3.9 per cent in last year. Further, improving rural economy due to higher production & sharp increase in commodity prices, fast pacing urbanization coupled with increased govt spending on pension and income support programs have also shore up household income and consumption. In addition, media penetration has created awareness amongst the rural population and has provided consumer goods companies with an all new target market. All this with the ability to pass on the inflationary pressure have forced off-shore investors to focus on consumer stocks. FMCG giants like Unilever and Nestle have witnessed great interest from foreigners. Thanks to rally in these stocks and more accumulation by foreigners, the shareholding pattern in these stocks is moving towards offshore investors.