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Fund Manager Review on Economy in July 2021: -

Sarmaaya Desk
Sarmaaya Content Team

Mutual funds aggregate money from investors and use it to purchase other securities, most commonly stocks and bonds. The mutual fund company's worth is determined by the performance of the securities it purchases. As a result, when you purchase a mutual fund unit or share, you are purchasing the portfolio's performance or, more specifically, a portion of the portfolio's value. Investing in a mutual fund is not the same as investing in individual stocks. Unlike stock, mutual fund shares do not provide voting rights to their owners. Instead of a single holding, a mutual fund share represents investments in a variety of stocks (or other securities).

According to stats and the market following are the top five mutual funds: -

Fund Name Assets No of Funds Market Future
National Investment Trust limited 64 billion 15 Neutral
ABL Asset Management Company Limited 34 billion 30 Neutral
HBL Asset Management Limited 26 billion 30 Positive
Atlas Asset Management Limited 4.9 billion 19 Neutral
Al Meezan Investment Management Limited 4.8 billion 33 Negative
Pakistan Mutual Funds this month: -

In the month of July-20, the KMI-30 index fell 0.6 percent MoM, while the KSE100 index fell 0.5 percent, as the market reacted to the start of the fourth wave of Covid-19 and concerns about the external account.

According to National Investment Trust Limited during July 2021, the KMI-30 index returned -0.47 percent. COVID instances continued to rise across the country, indicating a lackluster performance in the market. As a result, trading activity dropped, with average monthly volumes of 459 million shares, down 13% month over month. For the month, foreign selling totaled USD 28.60. SBP maintained the status quo in the MPS released earlier this month, keeping the policy rate at 7.00 percent. During July 2021, NIT IEF returned -1.16 percent, compared to a benchmark return of -0.47 percent, indicating a 0.69 percent underperformance.

According to ABL Asset Management Company Limited,during this month, CPI inflation was 8.41 percent YoY, compared to 9.30 percent YoY in the same period last year (SPLY). Despite a reduction in the current month, monthly inflation has turned positive to 1.29 percent, compared to a drop the previous month. This demonstrates that inflation is limited solely by the base effect. Inflation increased every month due to a rent adjustment during the month. Food, construction inputs, motor fuel, and other liquid hydrocarbons have all seen price increases recently. The increase in the trade imbalance was the key cause of the monthly increase in CAD. Exports increased by 17.49% MoM to USD 3.08 billion, while imports increased by 29.12% MoM to USD 7.17 billion, resulting in a trade deficit increase. Overall, the country's exports and imports totaled USD 31.57 billion (up 12.85% YoY) and USD 61.60 billion (up 17.56 percent YoY), respectively. On the fiscal front, the FBR collected PKR 410 billion in the month, compared to PKR 277.33 billion in the SPLY, above the objective of PKR 342 billion by PKR 68 billion. T-bill auctions had a strong interest in the 3M and 6M tenors throughout the month, with cutoff yields constantly dropping. The 3M cutoff yield fell from 7.31 percent to 7.24 percent, while the 6M cutoff yield fell from 7.58 percent to 7.52 percent, but the ministry turned down the amount provided in the 12M tenor. The government borrowed PKR 1,217.6 billion on July 21 spanning 3M, 6M, and 12M tenors. During the month, the KSE-100 index fell 301 points (0.6 percent MOM) for the second time, ending the month at 47,055. The average traded volume fell 52.6 percent month over month to 147 million, while the value traded fell 45.9% to USD 48 million. Foreign investors resumed their selling binge, dumping USD 26 million worth of stock. Domestically, insurers and corporations acquired in large quantities, with net purchases of USD 8 million and USD 7 million, respectively. Food and personal care items, as well as commercial banks, had foreign outflows of USD 3 million and USD 2 million, respectively, according to a sector-by-sector analysis.

Concerning HBL Asset Management Limitedfund manager report the macroeconomic picture has improved as a result of the government's policy actions following the Covid-19 pandemic. The economy has begun to revert to its pre-Covid trajectory, with a noticeable increase in economic activity, as evidenced by the provisional GDP growth rate of 3.94 percent in FY21. The government has released a pro-growth budget, and the administration expects growth to continue in FY22. The current account deficit (CAD) for the month of June-21 was USD 1,644 million, bringing the FY21 CAD to USD 1.85 billion (0.6 percent of GDP), down from USD 4.45 billion (1.7 percent of GDP) the previous year. Record remittance growth (up 29.7% YoY) and a decrease in the Services deficit (down 43.5 percent YoY) are driving the recovery in CAD. Automobiles (47.8%), Non-Metallic Minerals (26.1%), and Iron & Steel (13.6%) all contributed to the positive trend (14.1 percent ). Moving forward, they expect that GDP growth will continue to be positive, as the government has moved its focus from stabilization to growth as the economy has steadied. The ongoing fourth wave of Covid-19, on the other hand, could be a stumbling block. The spotlight would stay on the Covid-19 statistics and the government's policy responses to the pandemic's aftermath.

Atlas Asset Management Limited’s point of view is that the benchmark KSE-100 index fell 0.64 percent (-300.73 points) in July, closing at 47,055.29 points. Chemical, Textile Composite, Technology & Communication, and Commercial Banks all outpaced the benchmark KSE-100 index, with returns of 6.1 percent, 3.9 percent, 2.0 percent, and 1.4 percent, respectively. Cement, Engineering, Oil & Gas Exploration Companies, and Power Generation & Distribution all underperformed the benchmark index, with returns of -2.0 percent, -2.4 percent, -2.7 percent, and -5.8%, respectively. The market is currently trading at a P.E multiple of 7.0x and yielding 6.0 percent in dividends. The State Bank of Pakistan's latest monetary policy, issued on July 27, 2021, maintaining the status quo by keeping the discount rate at 8% (SBP Policy Rate at 7%). The MPC anticipates that financial conditions would continue adequately accommodating, with growth and inflation in FY22 likely to be in the range of 4% to 5% and 7% to 9%, respectively.

For Al Meezan Investment Management Limited the benchmark KSE -100 index fell 301 points (0.64 percent) in July 2021, closing at 47,055 points. The market's average daily volume was 464 million dollars, down 49 percent on a month-over-month basis. The Index's performance was dragged down by Oil & Gas Exploration Companies, Refineries, and Cement. The rapid rise in Covid 19 cases in the country, particularly in Karachi, where the positivity rate reached 30%, resulting in the city being placed under lockdown, the increase in the current account deficit in June, the depreciation of the PKR against the USD, and political uncertainty surrounding the Afghan settlement were all major reasons for the drop in the benchmark index. Foreigners were net sellers, selling USD 28.6 million during the month, while insurance companies, companies, and mutual funds were large buyers, buying USD 8.3 million, USD 7.6 million, and USD 6.9 million, respectively. During the month, oil prices rose 1.60 percent, with Brent c falling to USD 76.33/barrel.

In its most recent Monetary Policy Committee (MPC), the State Bank of Pakistan decided to hold policy rates steady at 7%, in line with our and market forecasts. With the sixth consecutive status quo decision on the policy rate, the MPC maintains an accommodating posture to sustain growth. Inflation is expected to remain in the 7-9 percent range in the coming fiscal year, according to the SBP. The MPC intends to retain an accommodative monetary policy framework in the future, gradually raising real interest rates towards the positive zone. Because of increasing food and gasoline prices, headline inflation in July was 8.4 percent, down from 9.6 percent in June 2021. The rupee declined by 4.89 and 4.30 rupees versus the US dollar in the interbank and open markets, respectively, to settle at Rs. 162.43/$ and Rs. 162.30/$. We think that exports will continue to expand in FY22 as the lockdown in our key export destinations is lifted or lessened. Imports will rise in tandem with economic activity, but this will be offset by increased commodity costs. The global economy, as we all know, will undoubtedly rebound despite supply limits. The current account deficit is expected to rise to 8-10 billion dollars in FY22, but this is a modest increase that can be easily paid by inflows from foreign lending agencies, scheduled bond insurances, and other incentives.

Summary: -

The stock market has seen a downfall and due to covid-19 and geopolitical situation, the prediction of the future has been difficult. As the market has performed well in the past we can come up that the market has the ability and tendency to remain neutral and carry on through this time. Moreover, mutual fund managers believe that despite these issues the market will work fine and has been better than in previous years.

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