EQUITIES ARE ATTRACTIVE LONG-TERM INVESTMENT
An exclusive interview with Nasim Baig, Chief Executive, Arif Habib Investment
By SHABBIR H. KAZMI
July 29 - Aug 04, 2002
Arif Habib Investment (AHI) is a member company of Arif Habib Financial Group. The main sponsor of the company is Arif Habib Securities Limited (AHSL), a listed company with capital and reserves of over Rs 700 million. AHSL is a local brokerage house, which has emerged as one of the largest and best-reputed companies in the capital markets business. World Era Limited, a mutual fund consultancy, is foreign technical and equity partner holding 20 per cent stake in Arif Habib Investment. Prior to the commencement of business leading financial institutions comprising of business groups and brokerage houses invested a total of Rs 500 million, in the two funds being managed by AHI — Pakistan Income Fund and Pakistan Stock Market Fund.
The historical data of the stock markets in Pakistan suggests that equities yield attractive return. The stock market, despite the low returns of about 11 per cent in the 'lost decade' of the nineties has still yielded an average of 18 per cent in the last 25 years. It has yielded over 22 per cent in the later part of seventies and throughout eighties. The improved economic management and other economic indicators suggest that stock market return will improve. The P/E ratio of the market is around 7. Typically the market has had a P/E ratio of around 12, suggesting that shares are still available at attractive prices and there is a good scope for growth.
However, it is difficult for an investor to make prudent decision depending on the needs and investment horizon. While some investors need regular and fixed return on their investment, others are willing to take higher risk to enhance return on their investment. Keeping in view the needs and preferences of various groups, we have launched two funds namely Pakistan Income Fund and Pakistan Stock Market Fund. We offer a number of financial products to earn, build portfolio and also ease of transfer from one package to the other. Since these funds are managed by professionals the opportunities for earning higher return are bright.
Pakistan Income Fund provides investors an opportunity to invest in a portfolio of money market investments such as spread transactions, carry over transactions, investment grade debt instruments, money market instruments and short maturity reserve repurchase transactions. Pakistan Stock Market Fund provided investors a facility to invest through one simple transaction into a range of Pakistan's high quality liquid shares of listed companies, focusing those scrips offering value in terms of good dividend yield or growth opportunity.
Some of our plans are: 1) Balanced portfolio, providing an opportunity to optimize between risk and reward. 2) Smart Portfolio plan to not only beat market volatility but make it work for investor. 3) Smart Traders allows investment in picks of the market. 4) Monthly Income Plans adds to an individual's bank account a regular stream of profit that is potentially higher than the interest rate offered by the bank. 5) Monthly Savings Plan provide the convenience and flexibility to accumulate savings towards a long-term objective. 6) Ready-Cash Income Certificates allows idle cash to grow. 7) Pension Builder plan strives to secure the objective of an insured pension for a pensioner and his/her family.
I would like to clarify a basic point that investing in shares of a company should be understood as becoming a partner in business. It must not be seen as taking a punt in the market. One may be lucky sometime but on an average one should not expect to do better than the business he/she is investing. Before making any investment decision one must explore details about the company, prospects of growth, determine his/her investment horizon and last but not the least, try to diversify the risk. Putting all the eggs in one basket is not a prudent decision.
All these efforts demand time and expertise which very few investors have at their disposal. Therefore, the prudent decision is to invest in a mutual fund with diversified portfolio or a balanced fund. Another important factor to be kept in mind is the ease of investment and/or redemption. One must never forget the fact that money received in future has a lower value than money received today. The team of professionals use variants of this concept in calculating the value of companies and the individual shares thereof. A final piece of advice, please take your time over your investment decisions. Do not be pressurised by anyone telling, you are about to miss an exceptional opportunity to make money. It is better to loss an opportunity than to lose your money.