January 3, 2020 (MLN): The departed year of 2019 was crucial for Pakistan in many ways – not just for the numerous slumps it went through but also the resurgence and resilience it showed afterwards. One such example of such resilience is the equity market, which in our view, broke several records this year for all the right as well as wrong reasons.
A look back at the dynamics of Pakistan’s equity market shows that it was not at all the same as it was when the year 2019 started. In fact, we believe this to be the most interesting part of the entire year – the start and the end were equally startling.
Over the course of the year, the KSE-100 index gained around 3,668 points or up by 9.9% as compared to the year prior to it. It is imperative to note that the market gave positive returns after almost two years, as the last positive return was seen in the year 2016 when it surged by 45.68%.
From its beginning till August 16, 2019 stock market displayed a dismal performance as it recorded a decline of 8,302 points, i.e. down by 22%. Afterwards, the market bounced back in style and surprised many by its recovery as it surged by 38% or 11,172 points.
As a direct result of this performance, the Equity Mutual Funds also generated varying returns throughout the year. All in all, the performance of these mutual funds failed to impress the investors, as only 13 out of the 27 funds managed to cross the yardstick of 9.9%. If that’s not enough, there were 4 such equity funds that went on to yield negative returns.
Going by the data compiled by Mettis Global, HBL Equity Fund (HBLEQF) emerged as the best annual performer with the largest positive return of 13.88%, as its NAV rose from Rs. 98.74 per share at the end of 2018 to Rs. 112.45 per share at the end of 2019.
With a high risk profile and an Asset Manager Rating of ‘AM2+’ assigned by VIS, HBLEQF mostly played in the field of Commercial Banks and E&P Sector, as it held most of its investments in OGDC (6.47%), PPL (6.46%), BAFL (5.59%) and UBL (5.43%) as of November 2019.
Next in line comes ABL Stock Fund (ABLSF) which gave returns of 13.66% over the year, as its NAV hopped from Rs. 12.3 per share on December 31, 2018 to Rs. 13.98 per share on December 31, 2019. Having a similar risk profile to that of its predecessor and a credit rating of ‘AM2++’ by VIS, ABLSF also held the larger portion of its investment with Commercial banks and E&P sector, as most of its holdings were placed in OGDC (8.02%), MARI (7.25%), HBL (7.04%) and BAFL (6.30%).
Some may justify the performance of Equity Mutual Funds with that of the benchmark index, making it appear like something that was inevitable. However, the records maintained by National Clearing Company of Pakistan suggest that the Mutual Funds Industry was one of the major reasons why benchmark index fell considerably in the first place.
Mutual Funds sold securities worth Rs. 25.3 billion, thus emerging as the largest net sellers. It is pertinent to mention here that the selling of securities by the Mutual Funds industry was a lot higher before the KSE-100 index touched an all-time low on August 16, 2019. According to the data available at NCCPL’s website, the securities sold by Mutual Funds before this point amounted to Rs. 88.3 billion.
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