AL MEEZAN INVESTMENT MANAGEMENT LTD
S.M. ABBAS ZAIDI,
Research Analyst, PAGE
Dec 22 - 28, 2008
Al Meezan Investment Management Limited (Al Meezan Investments), are a joint venture of Meezan Bank and Pak Kuwait Investment Company (PKIC), dedicated to providing Shariah compliant investment solutions. There core business is in investment management, specifically developing, floating and managing both open and closed end mutual funds, investment advisory and the discretionary management of institutional as well as high net worth individuals (HNW) portfolios. The company is registered with Securities and Exchange Commission of Pakistan (SECP) and is regulated under the Non-Banking Finance Companies (NBFC) Rules 2003 and NBFC Regulations 2007. They are licensed to provide investment advisory, asset management and investment finance services. Al Meezan has got Management Quality Rating "AM2" assigned by JCR-VIS. It is the first company in Pakistan to voluntarily adopt and implement "Asset Manager Code of Professional Conduct" from CFA Institute.
Al Meezan Investments deals in different products such as Meezan Islamic & Islamic income fund, Meezan tahaffuz income fund, Meezan capital protection fund, Al- Meezan Mutual Fund and Meezan Balance Fund.
MEEZAN ISLAMIC & ISLAMIC INCOME FUND
Meezan Islamic fund is used to invest only in Shariah compliant instruments. Under all applicable rules and regulations of the SECP, the fund ensures an investment policy that is strictly in accordance with approved Islamic principles and Riba-Free. MIF invests in combination of income and growth stocks of Shariah compliant companies with demonstrated track record of profitability and stable dividend payout history.
MEEZAN TAHAFFUZ INCOME FUND
The main objective if MTIF is to provide with a shariah complaint mechanism whereby they can save from there current income in order to gain benefits from their retirement or disability or when the other avenues are exhausted. MTIF aims to provide participants a regular halal income stream after retirement/disability when they can no longer earn regular income to support their living.
MEEZAN CAPITAL PROTECTION FUND
The purpose of MCPF-I is to provide the maximum total return to the unit holders from investment in shariah compliant with capital protection of investments upon maturity. By following rules and regulations the total return refers to returns from capital gains (realized and unrealized) and dividend income (from secondary and primary equities-Musharaka), rental income (from operating leases-Ijara), Mark-up (from cost plus sales-Murabaha) and other shariah compliant investments.
AL- MEEZAN MUTUAL FUND
Al-Meezan Mutual Fund Limited is a closed-ended mutual fund. The Fund's objective is to provide results through investment in growth stocks. The Fund invests its in securities, which are listed or proposed to be listed on the stock exchanges. Al Meezan Investment Management Limited acts as the investment advisor of the Fund.
MEEZAN BALANCE FUND
The objective of MBF is to generate long term capital appreciation as well as current income by creating a balanced portfolio that is invested both in high quality equity securities and Islamic income instruments such as Certificates of Instruments (COI's), Certificates of musharaka, Islamic sukuk, spread transactions along with other Shariah instruments.
The return on Dow Jones Islamic Markets Pakistan Index serves as the benchmark for Meezan Islamic Fund (IMF). During the quarter ended September 30, 2008, MIF declined by 26.63% as compared to the benchmark which declined by 27.94%, thus outperforming the benchmark by 1.31% during the quarter.
MIF during the first quarter FY 09 incurred a net loss of Rs. 1,568 million as compared to net profit of Rs. 371 million earned during corresponding period last year. For the quarter ended September 30, 2008, the fund incurred gross loss of Rs. 1,592 million, main contributors of which were dividend income of Rs. 52 million, capital loss of Rs. 75 million and revaluation loss of Rs. 1,572 million. After accounting for expenses of Rs. 35 million and element of income / capital gain on purchase and sale of units of Rs. 59 million, the fund recorded a net loss of Rs. 1,568 million for the quarter. The net assets of MIF decreased from Rs. 6,034 million at the beginning of the quarter to Rs. 4,320 million by the end of it, mainly due to decline in market value of investments. During the quarter, units amounting to Rs. 537 million were issued and units amounting to Rs. 623 million were redeemed, resulting in net outflow of Rs. 86 million.
EQUITY MARKET REVIEW
The downward trend at KSE that began in the final quarter of last year continued in to the first quarter of FY 09. In order to arrest the sharp decline, Securities and Exchange Commission of Pakistan (SECP) had changed circuit breakers to a floor of 1% and a cap of 10% on June 24, 2008. This measure, however, did not improve the situation and created a problem for margin traders who wanted an exit. Due to drying up of volumes after the introduction of these circuit breakers, the SECP decided to revert them back to the original 5% level on July 11, 2008.
In order to restore investor confidence, SECP and KSE took some market stabilization measures which provided some support to the market. However, the unabated economic pressures along with Moody's warning to downgrade the country's rating resulted in a market meltdown.
To stem further downslide in the market, the KSE Board of Directors on August 27, 2008 decided to place a floor on the index at a level of 9,144 based on the closing prices of securities that day. Since there is no price discovery since then, investors have stayed away from the market during the month of September and volumes were down to less than a million shares a day.
Despite a challenging economic outlook, we can hope about the long term growth trend of the country, the stock market and of Meezan Islamic Fund in the future. The floor mechanism has been removed along with the establishment of a stabilization fund, which will help to improve investor confidence. Future direction of the market is likely to be driven by growth prospects, political stability, level of balance of payment and foreign investment in the country. It is anticipated that growing interest from foreign and local investors in the equity market as it is currently trading at a PE multiple discount of 25% as compared to the regional markets.