As goes January, so goes the year, they say on Wall Street.
Going by the old adage, 2016 is likely to be a tough year for investors. Nineteen of the 20 mutual funds that invest mainly in listed companies posted a net loss in the first month of 2016.
Only one equity fund, JS Value Fund, posted a slight improvement (0.1%) in its net asset value (NAV) on a month-on-month basis in January.
The bearish trend prevailed in the national share market last month because of incessant foreign selling and declining crude oil prices. The benchmark index of the Pakistan Stock Exchange (PSX) declined 4.6% to 31,298 points in January, hurting the portfolios of equity funds across the board.
The first day of the current month has instilled some hope, but losses are far from recovered. As many as four equity funds underperformed the KSE-100 Index in January, according to data compiled by the Mutual Funds Association of Pakistan (MUFAP).
The rest of 15 equity funds outperformed the benchmark index, although their net returns remained in the red for January. The KSE-100 Index is typically the benchmark for most conventional equity funds operating in the country’s capital market.
In addition to JS Value Fund, the relatively better-performing equity funds last month were JS Large Cap Fund (-0.48%), JS Growth Fund (-0.78%) and PIML Value Equity Fund (-0.83%).
Equity funds whose performance remained the worst in January included AKD Opportunity Fund (-6.62%), PICIC Energy Fund (-6.07%) and Askari Equity Fund (-4.88%).
Last month witnessed heavy foreign selling on the PSX. The net outflow emanating out of foreign selling last month amounted to about $49 million in contrast with $34 million in the preceding month. Foreign selling has kept the national bourse under pressure for many months, as it clocked up at $290 million in the first seven months of 2015-16. In contrast, there was a net inflow of $115.9 million in the comparable period of 2014-15.
According to Alfalah Security Analyst Taha Khan Javed, the outflow of foreign investors’ portfolio investment in January remained skewed towards fertiliser, banking, and oil exploration and production stocks while textile and cement sectors received nominal inflows. The biggest net buy during January came from banks/development finance institutions ($31 million) and non-banking finance companies ($26 million).
Data compiled by Shajar Capital showed that a minor appreciation was recorded in the personal goods sector (+1.3%) whereas telecom (-11.8%) health care (-10%), banking (-8.6%), chemical (-8%), oil and gas (-7.4%) and food (-6.7%) sectors recorded negative returns in January.
Published in The Express Tribune, February 2nd, 2016.