FINANCE

 
1- FREE FLOAT OF PAKISTAN'S EQUITIES MARKET
2- MUTUAL FUNDS TO BENEFIT FROM PRIVATIZATION OF NRL
 

MUTUAL FUNDS TO BENEFIT FROM PRIVATIZATION OF NRL

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Sale of frozen investment will enhance the market liquidity and further erosion in equities value

 

By SHABBIR H. KAZMI
June 13 - 19, 2005
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The Cabinet Committee on Privatization has approved the highest bid for National Refinery sell-off. The Privatisation Commission had received the highest bid from Attock Group for acquiring 51 percent stake (33.985 million shares) in the company. The government received Rs483 per share as the highest bid from the Attock Group. The amount to be generated from this transaction would be to the tune of Rs16.415 billion, or US$273 million.

The NRL sell-off also brings a bonanza for the mutual funds of the country, generating total sale proceeds of nearly Rs8.684 billion. According to a report from Arif Habib Securities, the sell-off would generate liquidity to the tune of Rs8.684 billion for the local bourses. The successful privatisation of NRL would also result in capital gains and cash proceeds for the mutual funds such as NIT, PICIC Growth Fund, Abamco Capital Fund, Abamco Growth Fund and Abamco Stock Market Fund. The receipt from NRL can be a key driver for the economy and the market. This provides an opportunity for reinvestment of funds in the stock market and also offers sizeable returns to shareholders/unit holders.

According to the reports, the offer of Rs483 per share would bring Rs5.762 billion sale proceeds for NIT; Rs2.598 billion for PICIC Growth Fund; Rs227 million for Abamco Capital Fund; Rs77 million for Abamco Stock Market Fund; and Rs19 million for Abamco Growth Fund. This estimation has been made based on the annual reports of these asset management companies.

According to Tanvir Abid, Head of Research, Live Securities, "Submission of an attractive bid for NRL sell off is historic day for the country, and benefits of the privatisation would be widespread." The NRL sell off is an extremely positive move on the privatisation front and the stock market, going forward. First of all, given that the privatisation of NRL is 35 percent above the existing market price indicates that significant upside potential exists in the local share market. Secondly, taking a look it can be hoped that similar attractive sale proceeds would be received from the planned sell-off of Pakistan Telecommunication Company, Pakistan State Oil, Oil and Gas Development Company and Pakistan Petroleum.

According to another analyst, "If the proceeds are received in time it will also help in supporting the current erosion of vale of shares. At present, most of the scrips are being quoted at attractive prices and further erosion in values is expected due to planned phase out of Badla system. The support of institutional investors has become all the more necessary at this juncture."

This also provides an opportunity to the investors to buy shares of mutual funds, both open-end and closed-end, and earn good dividend. It is expected that inflow of huge cash, from the frozen shares' will also bring a fortune to the asset management companies. However, some analysts are of the view that even if asset management companies make tonnes of money, from NRL, one should not expect huge dividend payout, simply because it is an appropriate time to build and diversify the portfolio.

 

 

Stocks of energy related state-owned companies are almost integral part of portfolios of all the mutual funds. It is not because they have accumulated these shares over the years, but because they got bulk of those shares in the pre-IPOs. The average cost is only a small fraction of current quoted prices. In the recent past they benefited due to higher dividend payout by these companies. They would also continue to benefit because of the existing government policies.

For ages, investment advisors have been suggesting to the small retail investors that they should invest only in mutual funds. They say, small investors can minimize their risk by investing in the mutual funds. The message has become louder after the recent equities market crisis.

OPEN-END FUNDS
ATLAS INCOME FUND
DAWOOD MONEY MARKET FUND
FAYSAL BALANCED GROWTH FUND
MEEZAN ISLAMIC FUND
NIT
PAKISTAN INCOME FUND
PAKISTAN STOCK MARKET FUND
UNITED MONEY MARKET FUND
UTP
UTP INCOME FUND
UTP ISLAMIC FUND
CLOSE-END FUNDS
ABAMCO CAPITAL FUND
ABAMCO COMPOSITE FUND
ABAMCO GROWTH FUND
ABAMCO STOCK MARKET FUND
AL-MEEZAN MUTUAL FUND
ASIAN STOCK MARKET FUND
ATLAS FUND OF FUNDS
BSJS BALANCED FUND
DOMINION STOCK FUND
FIRST CAPITAL MUTUAL FUND
FIRST DAWOOD MUTUAL FUND
GOLDEN ARROW
INVESTIC MUTUAL FUND
MEEZAN BALANCED FUND
PICIC GROWTH FUND
PICIC INVESTMENT FUND
PAKISTAN CAPITAL MARKET FUND
PAKISTAN PREMIER FUND
PAKISTAN STRATEGIC ALLOCATION
PRUDENTIAL STOCK FUND
SAFEWAY MUTUAL FUND
TRI-STAR MUTUAL FUND