SECP prompts in­flow of fresh funds into PSX

The Gulf Today - Business - - UAE & REGION -

KARACHI: The gov­ern­ment has pro­vided much-needed liq­uid­ity for the weak­en­ing Pak­istan Stock Ex­change (PSX), which has gone down sharply due to po­lit­i­cal un­cer­tainty and for­eign in­vestor pull­out, by eas­ing reg­u­la­tions for mu­tual funds.

The apex reg­u­la­tor has in­creased in­vest­ment ceil­ing for mu­tual funds which can now in­vest up to 100 per cent of cash in the PSX com­pared to the pre­vi­ous 95 per cent limit, pro­vid­ing the mar­ket with bil­lions of ru­pees in ad­di­tional money flow.

“The Se­cu­ri­ties and Ex­change Com­mis­sion of Pak­istan (SECP) with­draws the re­quire­ment of main­te­nance of 5 per cent cash and near cash in­stru­ments in eq­uity funds and funds of funds with im­me­di­ate ef­fect,” SECP Ex­ec­u­tive Di­rec­tor Im­ran Inayat Butt said in a no­ti­fi­ca­tion.

The re­lax­ation has al­lowed eq­uity funds to pour an ad­di­tional Rs15 bil­lion into the mar­ket, which is equiv­a­lent to 5 per cent of their in­vest­ment size of Rs294 bil­lion as on Oc­to­ber 20, 2017, ac­cord­ing to data avail­able.

The per­for­mance of funds of funds at the PSX has re­mained very poor. Mu­tual funds have di­vested over Rs37 bil­lion in the bourse, ac­cord­ing to a monthly re­port on as­sets un­der man­age­ment.

How­ever, fol­low­ing the change in the reg­u­la­tion in the mid­dle of cur­rent week, the mu­tual funds be­came the largest do­mes­tic buy­ers of stocks in the week with in­jec­tion of over Rs1.79 bil­lion ($17 mil­lion) and ab­sorbed sell­ing from other in­vestors in­clud­ing for­eign­ers.

Con­se­quently, the PSX’S bench­mark KSE 100-share In­dex re­cov­ered 0.9 per cent week-on-week to 41,436 points on Fri­day. Ear­lier, the in­dex had fallen by 16 per cent since June 2017.

About a month ago, a del­e­ga­tion of 25 PSX of­fi­cials and se­nior bro­kers met and asked Prime Min­is­ter Shahid Khaqan Ab­basi to res­cue the bourse by creat­ing a Rs20-bil­lion fund un­der the man­age­ment of state-owned Na­tional In­vest­ment Trust.

In ad­di­tion to this, they sought re­lax­ation in tax levy on stock trade which in­cluded 15 per cent cap­i­tal gains tax, 15 per cent tax on div­i­dend, tax on bonus shares and tax on bro­kers.

The SECP had set the con­di­tion of 5 per cent cash-hold­ing for mu­tual funds in Jan­uary 2017 in or­der to en­able them to re­deem their units any time.

An­a­lysts have time and again noted large-scale sell­ing by mu­tual funds to re­deem their units, es­pe­cially since the mar­ket has been on a down­ward tra­jec­tory fol­low­ing the an­nounce­ment of anti-mar­ket bud­get in May 2017 and height­ened po­lit­i­cal un­cer­tainty.

The apex reg­u­la­tor has in­creased in­vest­ment ceil­ing for mu­tual funds in Pak­istan.

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