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KASB Stock Market fund - Fund Manager's Report - July 2010

Investment Objective
Inception Date
The Fund seeks to generate long term capital appreciation and income, from a portfolio that is substantially constituted of equity and equity related securities.
March 22, 2007
Type of Fund
Fund Size
Open-Ended Equity Market
PKR  235 million

Market Performance

KSE-30 index rounded off Jul-10 as the best month for 2010 to date  with 9.7% gains despite introduction of capital gains tax (CGT) from 1st July. In a regional context, this placed KSE as the second best  performer for July. The performance was slightly overshadowed by the surprise announcement by SBP at month end where contrary to  market expectations, the discount rate was raised by 50bp to 13% as the SBP cited inflation and fiscal account pressures as the main  reasons for the move. Volumes declined due to the initial tentativeness of CGT introduction and registered a 20% decline MoM to US$30mn. The robust performance despite uncertainties related to capital gains tax was possible due to continued Foreign Portfolio  Inflow (US$42mn in Jul; +40% MoM) and expectations of early reintroduction of leverage at the KSE. The product which is a close variant of the previously prevalent CFS product has been approved by the KSE and is awaiting SECP and government nod. However, there are a few concerns from the financier’s end, which may lead to a delay in implementation or an alteration in the product structure.

Fund Performance

During the month of July, the fund slightly underperformed its  benchmark by 0.83%. The fund gave an absolute positive return of 8.87%, while the benchmark increased by 9.7% (see table below). We continue to focus on generating better returns than the benchmark by following a research driven strategy while closely monitoring activities on the economic and political fronts, and by investing in fundamentally strong stocks At month end, the fund was 89.12% invested in equities and remaining 10.88% in cash and receivables.

Future Outlook

We believe market will take direction from quantification of losses in sectors and companies as well as overall economic impact of the devastating floods. The impact on the fiscal side, which was already under pressure and its resultant impact on the monetary side as well as quantum of aid flows would be key factors for future market direction. We believe market would remain largely range bound during August.
Load structure
Front-end 2.5%
Back-end Nil
Performance return

 KSMF KSE 30
Since Inception -13.39% -25.94%
FYTD
 8.87% 9.70%
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