The Securities and Exchange Commission of Pakistan on Wednesday issued directives to fixed income mutual funds to revalue Term Finance Certificates (TFCs) downward by 5-30 percent based on their respective ratings, which is expected to significantly hurt net asset value of income funds.
The SECP directed the fixed income mutual funds to revalue downward of AAA rating TFCs by 5 percent, AA+ rating by 7.5 percent, AA rating by 10 percent, AA- rating by 12.5 percent, A+ rating by 15 percent, A rating by 17.5 percent, A- rating by 20 percent and all others by 30 percent.
Mutual Funds Association of Pakistan (Mufap) called an emergency meeting on Wednesday evening to discuss these directives issued by the apex regulator. Sources said that the association has decided to revalue the TFCs downward according to the directives of the SECP.
They said that after implementation of these directives, the net asset value of overall funds will be reduced by 6 percent to 6.5 percent. However, the net asset value of portfolio TFCs will reduce by 15 percent.
Sources said that the decision was taken due to prevailing liquidity situation. However, it is expected that the value of TFCs will revert to their previous higher levels once the liquidity situation is improved. Analysts said that this move will lure commercial banks to invest in income funds at cheaper rates and offload these securities at a time when interest rate is reduced.
Comments
Comments are closed.