HBL Asset Management Limited, a subsidiary of Habib Bank Limited, has been licensed by the Securities and Exchange Commission of Pakistan (SECP) for Investment Advisory and Asset Management Services.
The entry of Habib Bank's subsidiary in the mutual fund industry would help in broadening the nation's mutual fund industry and expand investor base.
Shahid Ghaffar, Chief Executive Officer of HBL Asset Management Limited, in an interview with Business Recorder, said that the mutual fund industry in the country had grown at a very fast pace in the last couple of years. This showed that fund managers had been doing a good job in enhancing the size of funds under their management. However, in spite of the growth in mutual fund industry over last few years, the size of investor base, as well as fund under management, remained very small.
"Our country's population is over 150 million, and the number of unit holders is one-tenth of one percent. It needs lot of attention and a roadmap to lure this group, raising the size of the investors. As per mutual fund association website the number of unit holders is around 150,000 but we lacked data and there is the possibility that several unit holders might be unit holders in more than one mutual fund; so the actual number of unit holders might be even much smaller."
Shahid said that fund managers and the government, both should actively persuade and encourage people from all walks of life to invest in mutual funds. He added that the size of the mutual funds is 6 percent of total bank deposits, and 2.5 percent of GDP. Giving comparison, he said that the size of Hong Kong mutual fund is 188 percent of the GDP; Singapore 68 percent; Malaysia 25 percent; Taiwan 23 percent; and in India it is 7 percent.
"The main thrust of the government in encouraging more investors would be to sell as much shares through the stock market as possible, particularly the state-run companies. The Government is still holding substantial shares of some public sector listed companies. The share prices of these companies are many times more than the first offering price at the time of listing. The government should take advantage of the bull-run in the market by offering shares of these companies, such as OGDC, which was sold at 32 rupees a share and now is trading around Rs 160 per share.
Through offer for sale of public sector holding, the government can raise funds and can also help increase depth in the market. Moreover, the new listings are slowing down. "Rather if we take a bird's eye view of last five years, in 2001 the number of companies listed at the KSE was 774 and now it has gone down to 662. The government must encourage companies, through some tax incentives. There is a cost for listing. You as corporate are required to follow the listing rules, code of corporate governance and other requirements. So there must be some incentive for listing."
Shahid said that tax incentive allowed earlier, meaning difference between listed and non-listed, say about 10 percent parity, would surely encourage the local business houses to list their entities at the bourses.
The corporates should also develop new instruments so that people should have more options to invest their funds, such as preference shares, convertibles bonds, commercial papers, securitisation, and other short tenor bonds. He suggested to the government to encourage real estate investment trusts (REITs). REITs have great potential in this country, provided certain issues are addressed. These issues include tax issues, issues relating of official/non-official dealing in real estate and transfer of property procedures. Once above irritants are removed, REITs could be a good source of revenue generation for federal and provincial governments.
"Several types of mutual funds have been planned but we would disclose the nature of fund to be launched first after seeking approval from the board of directors of the HBL Asset Management Limited. It is great to see mutual fund industry gearing up its activities in the country. It would bring stability in the stock market; would improve the standard of research work and would provide more job opportunities to professionals," he said.
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