May 10, 2006	Wednesday	Rabi-us-Sani 11, 1427

KARACHI, May 9: Mutual fund assets in Pakistan have tripled in the last three years, and fund managers say the industry is set to grow further, thanks to a booming stock market and rising demand for funds among retail investors.

Rapid economic growth and relatively low interest rates have helped drive the growth in mutual funds. The industry’s combined net asset value stands at Rs180 billion ($3 billion), up from Rs50 billion in June 2003.

During that time, the Karachi Stock Exchange index has risen by nearly 2.5 times.

“We are looking at assets of around Rs500 billion over the next five years,” said Nasim Beg, chief executive of Arif Habib Investments, which manages seven different funds.

“There are over 40 mutual funds at this time, and more are coming and will keep coming,” said Mr Beg, whose firm controls a market share of nearly 11 per cent.

The National Investment Trust (NIT) is the market leader with a share of over 50 per cent.

Analysts say the low-interest rate conditions that have prevailed in Pakistan in recent years have made bank deposits and the National Saving Schemes (NSS) less attractive, convincing investors to look for other options.

Spotting the demand, major financial houses and leading banks have set up asset management companies.

“The entry of big players and commercial banks will provide the much-needed retail push to the industry,” said Zaheeruddin Khalid, head of research and product development at Al Meezan Investment Management.

“The contribution of the stock market rise is there, but the increase in retail customer base is very important for the long-term viability of the industry,” he said.

The Pakistani economy has grown rapidly in recent years. The country registered a growth of 8.4 per cent in 2005-06 –- the highest growth in nearly two decades and a remarkable comeback for a country on the verge of bankruptcy in 1999. The economic recovery — with growth last year second only to China among major economies — was also supported by Pakistan’s decision to side with the United States in the wake of the Sept 11, 2001 attacks, prompting an influx of aid and an end to Western sanctions.

Mr Beg said that while the economy was doing well, and listed companies producing good returns, mutual funds were eager for more investment options.

“Where there is a shortcoming is that not everyone wants to take exposure in investing in equities. There are people who would rather be invested in fixed-income securities,” he said.—Reuters