Out of 21 mutual funds, only two post positive returns

[Qalandari]

Returns of 12 out of the 21 equity-based conventional mutual funds were better than the benchmark index in February, Mufap data shows. PHOTO: PPI

KARACHI: Only two out of 21 equity-based conventional mutual funds operating in Pakistan posted positive returns in February, according to data compiled by the Mutual Funds Association of Pakistan (Mufap).

The poor performance of stock funds was largely in line with the overall direction of the share market that remained bearish for most part of February.

The Karachi Stock Exchange (KSE) 100-share Index stood at 33,632 points at the end of February, down 2.4% from the beginning of the month. It is typically the benchmark for almost all conventional equity funds operating in the country.

Returns of 12 out of the 21 equity-based conventional mutual funds were better than the benchmark index in February, Mufap data shows.

According to BMA Capital research analyst Muhammad Affan Ismail, major sectors dragged the overall index down in February. For example, the pharmaceutical sector gave a negative return of 5.3% on the government’s refusal to allow immediate price increases in the new drug policy, he said.

Similarly, the banking sector was down 4.8% on monetary easing, cement stocks lost steam (-4.6%) on renewed concerns over price sustainability, and textiles came down 3.5% on extended gas supply cuts and an unexciting textile policy, he added.

The recent bearish trend in the stock market is in contrast with its bull run in 2014, when Pakistan was the third best market in the world with 33.7% dollar-based returns.

The best-performing equity-based mutual fund in February was PICIC Energy Fund, which posted an absolute return of 2.68%. It was followed by Askari Equity Fund (2.2%).

Despite posting negative returns in absolute terms, 10 equity funds performed better than the benchmark index in February.

These were ABL Stock Fund (-2.08%), Alfalah GHP Alpha Fund (-1.7%), Atlas Stock Market Fund (-1.43%), Crosby Dragon Fund (-0.91%), First Capital Mutual Fund (-1.75%), IGI Stock Fund (-2.05%), JS Value Fund (-2.35%), Nafa Stock Fund (-1.95%), Pakistan Stock Market Fund (-0.41%) and Pakistan Strategic Allocation Fund (-0.63%).

Conventional equity funds performing worse than the benchmark index in February were AKD Opportunity Fund (-7.64%), First Habib Stock Fund (-2.62%), HBL Stock Fund (-2.91%), JS Growth Fund (-5.12%), JS Large Cap Fund (-3.83%), Lakson Equity Fund (-3.45%), National Investment Unit Trust (-3.35%), PICIC Stock Fund (-5.86%) and United Stock Advantage Fund (-3.72%).

According to Ismail, foreign interest in the stock market remained weak with a net outflow of $9.8 million in February. A healthy growth of 21% on a year-on-year basis in the second-quarter corporate results, excluding oil and gas, and a rebound in oil prices also failed to provide any impetus to the stock market, he noted.

According to KASB Securities, the positive direction of the stock market in the near term will be determined by the upcoming interest rate announcement, divestment of the government stake in Habib Bank, Senate elections and expectations of strong corporate earnings for the first quarter of 2015.

Corporate results: PSO’s earnings drop 73% in first half – The Express Tribune