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Performance of ICP managed mutual funds

Dec 13 - 19, 1999

The mutual funds listed at the Karachi Stock Exchange can be divided into two distinct groups, one managed by Investment Corporation of Pakistan (ICP) and the other managed by the private sector. ICP has floated 26 funds with total paid-up capital of Rs 3,140 million. The total paid-up capital of 13 private mutual funds is over Rs 1,621 million. The dividend declared by the ICP may look low but the profitability of the Funds was affected by the overall sluggishness of the economy of the country. Following are the excerpts of interview of Asad Ullah Khawaja, Managing Director, ICP.

For the last many years Pakistan's capital market has been dominated by the traders and real investors have taken a sideline. This is evident from the daily trading volume. Bulk of it is confined to less than 10 companies. At the same time retail investors and fund managers like ICP have become too cautious — individuals because they have burnt their fingers and fund managers because they have to look after the interest of small savers. As the market has remained bearish the prospects of making capital gains are few. Similarly, dividend payouts were also low. ICP is stuck in a situation where it cannot even take the advantage of buying shares at a discount due to liquidity crisis.

ICP has not been able to float any new fund during last four years due to a number of reasons. Over the last three years only a few companies offered their shares for public subscription, opportunities for making capital gains were low and dividend income also reduced considerably. At the same time, it was not in a position to off-load shares of state enterprises.

Therefore, it is necessary to examine some of the factors which been adversely affecting the capital market. These include, IPPs controversy, post nuclear test sanctions and near-default situation faced by Pakistan. During this period the market constantly suffered from selling pressure by the fund managers. Another important factor is tax exemption on capital gains. There is no distinction between gains made from trading and the gains from investment. The GoP must look at this and amend the law by defining minimum period to qualify for exemption.