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Fund manager review on economy in August 2021: -

Sarmaaya Desk
Sarmaaya Content Team

According to the market, the following are the top five mutual funds:

Fund Name Assets No of Funds Market Future
National Investment Trust limited 63 billion 15 Neutral
ABL Asset Management Company Limited 26 billion 30 Negative
HBL Asset Management Limited 24 billion 30 Positive
Atlas Asset Management Limited 5.4 billion 20 Neutral
Al Meezan Investment Management Limited 4.8 billion 33 Positive

According to National Investment Trust Limited ,In August 2021, benchmark index remained range-bounded during the month of August, 2021 and witnessed a gain of 1.81% MoM. The average daily volume of the KSE-100 index dropped by 13.6% MoM to 127mn shares as compared to 147mn shares in the previous month. The result season failed to excite the investors despite strong earnings and payouts. Equity market remained in the channel of uncertainty due to the developments taking place in neighboring Afghanistan and its possible spillover impact on Pakistan coupled with rising international commodity prices which could build pressure on the country's balance of payment and inflation as well. NIT IEF posted a return of 0.54% during the month of August, 2021 as against a benchmark return of 1.81% showing an underperformance of 1.28%.

According to ABL Asset Management Company Limited,Inflation clocked in at 8.35%YoY in the month under review compared to 8.21% in the same period last year (SPLY). Overall inflation appeared to be slowing on MoM basis registering an increase of 0.58% in Aug '21 compared to 1.29% in the previous month. On a yearly basis food inflation swelled by 9.97% while the housing index witnessed an increase of 7.96%YoY. Among food index tomatoes registered an increase of 17.84% while fresh vegetables observed an increase of 12.52%YoY. Going forward, volatility in global commodity prices and exchange rate devaluation remain the biggest inflationary threat and we expect the inflation to average around ~7.5%. On the balance of payment (BOP) front, Pakistan posted a current account deficit (CAD) of ~USD 779 million during Jul’21 compared to ~USD 583 million in the SPLY. The primary reason for the monthly increase in CAD was the increase in trade deficit. Exports increased by 19.7%YoY to USD 2.3 billion in Jul’21 while imports of goods increased by 51.7%YoY to USD 5.4 billion. On the other hand, workers’ remittance remained steady at USD 2.7 billion and is expected to keep the current account deficit close to SBP projection for FY22. Finally, the foreign exchange reserves, at SBP, stood at ~USD 20.15 billion, as of August 27th 2021, providing a total import cover of ~3.25 months. On the fiscal side, FBR managed to collect ~PKR 435 billion during the month compared to PKR 415 billion in the previous month.

According to HBL Asset Management Limited,The policy decisions taken by the government after Covid-19 epidemic has resulted in an improvement in the macroeconomic landscape. The economy has started to regain its pre-Covid trajectory as there has been a notable pickup in economic activity as evident by the provisional GDP growth rate of 3.94% for FY21. The government has unveiled a pro-growth budget and expects the growth momentum to continue in FY22. CPI for August-21 clocked in at 8.40% YoY increasing by 58bps MoM. The MoM increase was largely driven by an increase in food prices, which contributed 25bps to MoM Inflation. However Core CPI indicators remained in check with CPI (Urban) clocking in at 7.1% YoY while core CPI (Rural) went up by 9.9% YoY. The Current Account deficit (CAD) for the month of July-21 clocked at USD 773mn, compared to a surplus of USD 583mn in the same period last year. The disappointing CAD is primarily driven by higher imports during the period as a result of higher commodity prices in the international market. FY21 LSM data showed an encouraging trend as it increased by 14.8% YoY driven by Automobiles (51.1%), Non Metallic Mineral (26.66%), and Chemicals (19.2%). Moving ahead, we believe that the GDP growth is likely to remain encouraging as government has shifted its focus to growth from stabilization measures as the economy has stabilized. This will be further aided by the higher vaccination statistics in the country. The focus would remain on Covid-19 numbers and the policy actions taken by the government to control the fallout from the pandemic.

According to Atlas Asset Management Limited,The benchmark KSE-100 index increased by 0.77% (364.45 points) to close at 47,419.74 points in Aug’21. Daily average trading volumes decreased by 20.85% MoM to 364 Mn shares in Aug’21 from 460 Mn shares in July’21. Companies, Other Organization, Broker Proprietary Trading, Individuals and Mutual Funds were net buyers of USD 13mn, USD 8mn, USD 2mn, USD 2mn and USD 0.4mn, respectively. Banks, Foreign Investors and Insurance Companies were net sellers of USD 2mn, USD 10mn and USD 14mn, respectively. Sectors that outperformed benchmark KSE-100 index were Technology & Communication, Engineering, Commercial Banks and Textile Composite yielding 6.0%, 4.4%, 2.6% and 1.9% returns, respectively. Oil & Gas Exploration Companies, Power Generation & Distribution and Cement sectors underperformed the benchmark index yielding 0.4%, -0.6% and -1.5% returns, respectively. Technology & Communication sector outperformed benchmark index on the back of rising IT related exports and appreciation of USD against PKR. Textile Composite outperformed KSE-100 index due to high industry utilization levels and improved profitability outlook on the back of duty benefits (provided in FY22 budget) and currency devaluation. Cement sector underperformed the KSE-100 index due to seasonal decline in construction activity amid high imported coal prices. Currently, the market is trading at a P.E multiple of 7.0x and has a dividend yield of 6.0%.

According to Al Meezan Asset Management Limited,The benchmark KSE-100 index went up by 364 points (Up 0.80%) to close at 47,420 points. The average daily volume of the market stood at 364 mn, down by 21% on MoM basis. Banks and Technology sectors were the major positive contributors to the index performance.
Major reasons behind the increase in benchmark index were strong corporate profitability, Pick up in covid 19 vaccination drive, peaceful takeover of Afghanistan by Taliban post US exit and inflow of USD 2.75bn from the IMF under the global SDR allocation. However, recent sharp PKR depreciation against USD and concerns over rising import bills resulting in high trade deficit kept the market upside in check.
The oil prices decreased by 4.38% during the month with Brent closing at USD 72.99/ barrel. While near time volatility cannot be ruled out, we continue to maintain a long term positive outlook on the equity market.

Summary: -

The stock market has dropped, and forecasting the future has been tough owing to Covid-19 and the geopolitical environment. We may conclude that because the market has performed well in the past, it has the potential and tendency to remain neutral and carry on throughout this period. Furthermore, mutual fund managers feel that, despite these challenges, the market will continue to function normally, as it has in the past. Furthermore, mutual fund managers feel that, despite these concerns, the market will perform well, and that it has performed well in recent years.

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