KARACHI, Nov 29: Foreign portfolio investment started flowing back into the country after easing of political uncertainty with positive developments including doffing of army uniform by President Musharraf.

The State Bank’s figures on Thursday showed that the net inflow of foreign investment in the shares market was $42 million on November 28, the day General Musharraf sheds his uniform.The foreign investment started flowing out from the country since the imposition of emergency. The emergency was imposed on November 3 and a major jolt was noted in the Supreme Court when a dozen judges were removed.

“Now it looks that political scenario is clearer than earlier and this is the main reason that the foreign investors have started coming back into the market,” said Mohammad Suhail, director Equity Broking at JS Global Securities.

However, he said it was not a big selling after emergency as the total foreign investment in the stocks was about $4.5 to $5 billion while the total selling during November was $250 million.

Analysts said the imposition of emergency has shaken the confidence of the foreign investors resulting into the selling of shares and forcing them to stay away from further investment.

Analysts said it was also felt that the political uncertainty would not allow the country to launch GDRs of its few top companies into the international market as foreign investors were hesitant to enter into any deal after the emergency creating uncertainty.

Since the beginning of the new fiscal the foreign investors were not enthusiastic as inflows were almost negative during the first three months (July-Sept) of the current year but October received record inflows.

The portfolio investment reached $302 million in October, 2007, which were record high inflows in a single month.

Analysts said that now a series of decisions appeared on the political horizon, which showed that the commitments made by the president were being honoured. They said the elections date was given as per the requirement of the Constitution; Supreme Court legalized the president’s election and now the change of guards in the army.

“Shedding of uniform and lifting of emergency by mid-December would further strengthen the confidence of the investors,” said Mohammad Imran, head of research at First Capital Securities.

The market also believes that the elections would not be boycotted by any major political party. All political parties have filed their nominations for contesting elections.

Some analysts were of the view that the uncertainty would remain looming over investors until a new government settles in Islamabad.

“For the last eight years the economic policies were kept unchanged and no major change was witnessed during the period, which boosted confidence of both the local as well as foreign investors,” said another analyst.

He said the presence of President Musharraf and his political allies assured continuity of the economic policies, which finally paid dividend during the last four years and the average rate of economic growth was 7 per cent.

Since President Musharraf is no more in a position to assert his policies after the election of the new government and new economic team, we should expect some change, he added.

“We can not say what kind of economic change could come but the need for the continuity of economic policies is essential for economic growth, however, it will be clear only after the arrival of the new economic team, till then uncertainty will prevail,” said a banker.