VALUE SEEKER

A Daily Publication of InvestCap Research

Pakistan Research Monday, August 30, 2010

Industry Size (Jul-10) Rs212bn

Mutual funds industry commences FY11 with 6.4%
Open-end Rs179bn
Closed-end Rs33bn Highlights
No. of Funds 125 • Mutual Funds Industry Review - showing a growth of 6.4% in Jul-10
Open-ended 106 • Income Funds category appreciated by minimal 1.5% in Jul-10
Closed-end 19 • Money Market Funds category continue its upward momentum
Asset Managers 26 • Equity Funds category rose by 4.7% amid KSE appreciation of 8.2% in Jul-10
• Outlook
In today’s Value Seeker, we present an excerpt of our detailed report on the local Mutual
Funds Industry titled ‘Invest Guide’ where we discuss local mutual funds’ performance for
Jul-10 as well as Jan-Jul10 (7MCY10). The report also reviews the Income, Money Market
and Equity Funds categories based on the asset growth and returns earned by the categories.
OPEN-END MUTUAL FUNDS SIZE JUL-10
Local mutual funds industry - showing 6.4% growth in Jul-10
The local mutual funds industry appreciated by 6.4% in Jul-10 to close at Rs212bn. On
Category Asset Growth
a MoM basis, the positive number in growth was witnessed after three months, when
(Rs mn) MoM the industry showed an appreciation rather than declining trend since Apr-10. Com-
Income 60,877 1.54% paring the industry size to Dec-09 level of Rs225bn, the industry still lags behind by

Money Market 41,187 28.53% 5.7%. Since the announcement of the Capital Gain Tax (CGT) implementation on
equities, investors have been shifting their funds more towards the income & money
Equity 40,996 4.71%
market funds categories (especially to the money market funds category, which
Index Tracker 240 7.66% showed an appreciation of a massive 142% during the last 7MCY10 while 29% growth

Asset Allocation 2,041 2.16% witnessed alone in Jul-10 on a MoM basis).

Balanced 4,662 -1.70% Income Funds category appreciated by minimal 1.5% in Jul-10
Islamic Equity 5,392 7.59% After a massive decline of 21% in the size during FY10, the income funds category has
shown a growth of only 1.6% in Jul-10, thanks to a newly launched income fund namely
Islamic Income 12,771 2.06%
PICIC Income Fund managed by the PICIC Asset Management (first open-end in-
Islamic Bal. & Alloc. 1,730 3.10% come fund by the asset manager) during the month. However, due to increased
Hybrid & Cap. Pr. 7,061 -17.23% volatility in the TFCs (price, ratings), the investors’ interest seemed missing to con-
sider placing funds in the income funds category in recent times. The category is
Fund of Funds 866 3.46%
showing a decline of 9% during 7MCY10 settling at Rs61bn.
Bond 1,515 0.60%
Money market funds - continuing upward momentum
Total 179,338 6.63%
The star-performer in FY10, the money market funds category still has a potential to
Source: FMR, InvestCap Research grow. As in Jul-10, the category again appreciated by a solid 29% reaching at Rs41bn
with an induction of two new open-end money market funds in the category. During
the last 7MCY10, the category boosted by 142%, from the levels of Rs17bn in Dec-09.
Equity category rose by 4.7% - KSE appreciation of 8.2% in Jul-10
In Jul-10, the KSE100 index appreciated by 8.4% with major activity witnessed in the
Power, Textile and Cement sectors. The equity funds category grew however by only
4.7% in Jul-10 while showed a decline of a massive 42% during 7MCY10, as compared
to the KSE100 index return of 3.6% recorded during the same period.
Outlook
On last working day of Jul-10, the SBP inched up its policy rate by 50bps as against
the industry-wide expectations of no change in monetary stance of the central bank,
which has hurt the market sentiments for equity funds as well as the long-term-paper
investors. Meanwhile, in the last auctions of the T-bills, major participation was wit-
nessed in the short-tenure instruments showing that market participation remained
and is expected to be concentrated in the short-term instruments going forward.
Mazhar A. Sabir
mazhar@investcapital.com
+92 21 111 111 097 (Ext. 8635)
InvestCap is the brokerage arm of:
Invest Capital Investment Bank Ltd.
www.investcapital.com