Mutual Funds performance review: March 2017

The month of March was a slow month for the stock market. Both volume and value traded were down about 30 percent compared to the previous month. The slowdown was due to two main factors. Firstly, the Panama case has kept many investors at bay. The lack of clarity in the political arena and the media frenzy to go with has not helped either. Secondly, the clampdown undertaken by SECP on brokers who were misusing investor funds and its subsequent impact on in-house financing also played a part in drying up the volumes.

On the investment flow side, individual investors were the biggest sellers in March with a net outflow of $31 million. Foreign investors remained net sellers with a net outflow of $23 million. Mutual Funds were net buyer with an inflow of $19 million.

Interestingly during the month six stocks were added to the FTSE Word Asia-Pacific ex Japan index. Considerable foreign activity was witnessed on the day of re-balancing. Record high volumes were seen in stocks like (PSX: HBL). Something to look forward to as MSCI upgrades nears.

According to data compiled by Mutual Funds Association of Pakistan (MUFAP), mutual funds in-line with the market performance posted positive returns. Conventional equity funds gave an average return of -0.32 percent outperforming the the KSE-100 index by 0.46 percent. The top performing fund in this category was National Investment Unit Trust with a return of 1.45 percent. The fund has legacy positions in most of the stocks which drove the index upwards. Stocks like Mari Petroleum (PSX: MARI), Sui Northern Gas Pipeline (PSX: SNGP) and Pakistan Tobacco (PSX: PAKT), all were in top ten holdings of the fund which made sure that it outperformed it peers.

The second best performing fund in this category was UBL Stock Advantage Fund with a return of 0.45 percent.

Mutual funds investing in Shariah compliant equities fared relatively well as compared to the conventional funds in March. The benchmark Islamic index KMI-30 went down by 2 percent. The average return in this category was -0.19 percent

The best performing fund in this category was NAFA Islamic Stock Fund with a return of 1.21 percent. The runner up win this category was Meezan Energy Fund with a return of 0.84 percent. The alpha for these funds was also generated by MARI and SNGP. As per the last data available SNGP and MARI represented 13 percent and 7 percent respectively of Meezan Energy Fund total assets.

Looking forward, the market is expected to remain range-bound until the decision from the supreme court comes. Result season is also over and focus has turned towards Q1 and Q3 results, which could lift up the market if both topline and bottom-line growth is posted.