Nasim Beg is at present Chief Executive
Officer of Arif Habib Investment Limited. He was instrumental in setting
up this mutual fund company. Prior to this he worked for National
Investment Trust (NIT). He played an active part in the turnaround of
NIT. He has over 32 years of experience out of which 16 years pertain to
financial sector working abroad as well as in Pakistan. He is on the
Board of Directors of a number of companies. He is also a member of the
Executive Committee of the Mutual Funds Association of Pakistan. Nasim
is a Chartered Accountant by profession. He completed his articleship
with A. F. Ferguson & Company and stayed there from 1965 to 1970.
PAGE: The KSE-100 index has crossed 3,000 level,
what will be its future direction?
NASIM BEG: Looking
at the strong economic fundamentals, earnings potential of listed
companies and the prevailing liquidity, the index is expected to
continue its upward movement. Saying this, I also believe that we will
experience minor ups and downs, as day-to-day market sentiments impact
prices on an ongoing basis. Most of the scrips are still trading at
below the average historic earnings multiples. Almost all the volume
leaders still offer very attractive dividend yields. Therefore, more
funds are expected to flow to equities market. With the further
improvement in corporate earnings dividend yields are expected to remain
attractive despite the hike in prices of scrips.
PAGE: Is there any difference in rallies of
nineties and present euphoria?
single but most visible difference is that foreign fund managers drove
rallies of nineties. Whereas, present increase, I would not call it
euphoria, is mainly due to the active participation of domestic
institutional and retail investors. As almost all other investment
options offer much lower return than that offered by the quality
equities, investors are now investing more and more funds in the equity
market. The other, also very important difference, is that in the
nineties investors bought shares without properly looking at the
earnings potential of those companies. Today the investors ask questions
about track record, future plans and earnings potential. The credit for
the better equity environment goes to much better regulation and
disclosure requirements as well as the better quality research published
by brokerage houses.
PAGE: Why there has been constant increase in the
prices of volume leaders?
prices till about a year and a half ago were trading at very low levels
— around multiples of three times earnings. The overall confidence
level was very low. With the markedly improved political and economic
conditions today, the earnings multiple has come up to around eight
times — still at a discount to our historical average. Add to this the
robust earnings growth, the prices are still very attractive. Investors
are looking at high dividend yields in context of the very low fixed
income returns on debt securities and deposits etc. In addition to this,
there is a large amount of liquidity chasing a few scrips. The general
perception is that the number of quality large capitalisation scrips can
be counted on ones fingers. The market float of large-cap companies
still is small.
PAGE: How the supply of scrips offering modest
dividend yield can be increased?
NASIM: The GoP
is keen in pursuing its privatisation policy. However, although the
process started about fifteen years ago, it has not moved at the desired
pace due to various factors. In the prevailing circumstances, the
preferred policy would be to list all the state-owned enterprises and
off load a part of the GoP holding through stock exchanges. This will
help the GoP to realize funds from sale of shares of these entities and
still retain the management control pending ultimate sale to strategic
investors as and when all other arrangements are complete. The GoP has
off load only 12.5% shares of PTCL. The State Bank has a policy,
requiring all the commercial banks incorporated in Pakistan to be listed
on the local stock exchanges. However, Allied Bank of Pakistan, Habib
Bank, United Bank and some smaller banks are yet to be listed. The
Government has recently announced a policy to offer shares of OGDC and
other entities, including the Pakistan Steel Mill through the exchanges.
This is a good policy.
PAGE: Earlier you talked about creating awareness
among the investors, what more should be done to create awareness among
Pakistan experienced two major financial scams of investment companies
and cooperatives; in addition we also had a not-so-talked- about scam of
siphoning off by many listed companies — as I said earlier, set up for
the wrong reasons. The bulk of the blame must lie on the then regulators
who slept and did not take any corrective measures; a lot of blame also
goes to investors for being driven by greed. The regulators today, both
the State Bank and the SECP, have improved considerably.
The Mutual Fund Association (MUFAP) has decided to
launch an awareness programme. We want investors to take informed
decisions and assume a well-calculated risk in line with their risk
taking capacity. Our company, Arif Habib Investments is also running
awareness programmes on its own and we have a fair amount of investor
education material on our website. We also run training seminars for our