Mutual funds performance - December 2016

The closing month of 2016 was one of the best performing months for the Pakistan Stock Exchange. The benchmark KSE-100 galloped 12 percent in December and finished off the calendar year with a return of 46 percent.

Just two months ago the situation was looking bleak for the market in the wake of protests and political uncertainty. The market action following those events has been nothing short of extraordinary.

During December outflow of foreign portfolio investment continued but it had no effect on the sentiments as local institutions kept on buying at every level. The neutralization of foreign funds has been one of the top stories of 2016. In terms of numbers total foreign outflow during December was about 144 million dollars. Mutual funds were the biggest buyer on the other side with 119 million dollars. Additional support was given by individuals and NBFCs.

According to data compiled by Mutual Funds Association of Pakistan (MUFAP) mutual funds in-line with the market performance posted positive returns. Conventional equity funds gave an average return of 10.84 percent underperforming the KSE-100 index by 1.16 percent.

The top performing fund in this category was Atlas Stock Market with a return of 14.57 percent. The fund was overweight in most of the stocks which drove the index upwards. Stocks like Mari Petroleum (PSX: MARI), Habib Bank (PSX: HBL), Pakistan Oilfields (PSX: POL), United Bank (PSX: UBL) all were in top ten holdings of the fund which made sure that it outperformed it peers. The second best performing fund in this category was ABL Stock Fund with a return of 13.56 percent.

Mutual funds investing in shariah compliant equities had an interesting last month of the year. The benchmark Islamic index KMI-30 went up by 14.50 percent. None of the mutual funds in this category tracked by MUFAP were able to beat the index. The average return in this category was 11.27 percent which is more than 3 percent lower compared to their benchmark.

The best performing fund in this category was the NAFA Islamic Energy fund with a return of 13.77 percent. KMI-30 index is heavily tilted towards the oil stocks and since this fund only invests in energy stocks, it was able to post relative better return. The second best performing fund in this category was the ABL Islamic Fund with a return of 13.25 percent.

Looking ahead, the new-year has also started on a positive note for the stock market. With MSCI upgrade now only six months away, most of the fund managers are bullish and do not see any major downside. Potential risk to their bullish thesis can come in the form any political mishap or global economic downturn which could momentarily halt the progress of this bull-run.