LAHORE: Small investors should enter the capital market through mutual funds to mitigate risk and take advantage of qualified expert advice for better returns.
This was stated by the National Investment Trust chairman, Tariq Iqbal Khan, while briefing reporters on the capital market and the role of mutual funds in its development.
He said that the fundamentals of economy had improved, but the capital market was overly-depressed due to political and law and order situation.
He pointed out that mutual funds and bonds market were more favoured instruments of investment in developed economies.
For example, he said, against bank deposits of $66.9 billion in Pakistan, the net assets managed by mutual funds were equivalent to $2.75 billion, which was only 4.4 per cent of the bank deposits.
India had bank deposits of $751.8 billion and the net assets under the management of mutual funds were to the tune of $77.5 billion or 10.3 per cent of the bank deposits.
The US had bank deposits of $7363.7 billion while net assets managed by the mutual funds were $9248.9 per cent or equivalent to 125.6 per cent of its bank deposits.
He said out of 107 mutual funds operating in Pakistan 86 were open-end mutual funds and 21 were closed-end mutual funds. Seven pension funds were among the open-end mutual funds.
Currently, he said, the capital market of Pakistan had capitalisation of $25.7 billion against $602.4 billion in India and $13,886 billion in the US. Net assets of mutual funds in Pakistan’s capital market were to the tune of $2.75 billion equivalent to 10.7 per cent of the market capitalisation, he added.
Against this, the net asset value of Indian capital market was $77.5 billion equivalent to $12.9 billion of the market capitalisation.
The net assets of the US capital market were $9248.9 billion which was 66.6 per cent of market capitalisation.
He dispelled the general perception that some institutions, including the NIT, intervened in the in the falling capital market on the instructions of the government to give it a boost. He said the institutions act independently and take investment or selling decisions in the larger interest of investors.
He said this was the reason that the NIT had constantly been outperforming average growth at the Karachi Stock Market.
He said in depressed times the NIT losses were always lower than the general decline in the capital market.
He said institutions did intervene in the capital market to stabilise it in the larger interest of investors.
He said almost all mutual funds operating in Pakistan were being run by highly qualified professionals.
He said that the NIT had about 38 per cent share of the total open-end funds of Pakistan and 80 per cent of the open-end equity funds. The trust, he said, had investment in around 450, out of total 651 companies listed on KSE.
Value of NIT’s fund invested in the market at current price levels was around Rs72 billion. He said that the NIT was the single largest institutional investor in the KSE. Presently, he said that the NIT had over 55,000 unit holders, who collectively hold 1.9 billion NIT units.