KARACHI, Dec 17: A majority of the equity funds would continue to exercise their right of freeze on issuance, valuation and redemption, various industry stalwarts said on Wednesday.

In an earlier announcement during the prevalence of the floor at the stock markets, the Mutual Fund Association of Pakistan (Mufap) had announced the discontinuation of operations until the fourth day after the removal of the floor. But most major funds were known to have decided to carry on with suspension. Many had already made announcements in that regard.

Around 15 equity funds hold around Rs100 billion under management, including the funds managed by the largest public sector fund, National Investment Trust (NIT).

It was learnt that in the legal context, Mufap had no authority to take a decision on behalf of the entire industry. On Wednesday, in reply to a directive sought by Mufap, the Securities and Exchange Commission of Pakistan (SECP), the apex regulator, told the representative body that each fund could act in accordance with their relevant constituent papers.

“Those include the offering documents and the Trust deed,” said a senior fund manager. Those documents usually contain clauses that provide fund managers the authority to go into suspension if there were circumstances that the operation would prejudice the interest of unit holders, a fund manager said. Also, in accordance with the new NBFI regulations, the power to take such decisions rested with the board of directors of each fund.

NIT chairman Tariq Iqbal Khan told Dawn on Wednesday that the Trust had made public announcement of its intention. He said that the NIT would exercise the suspension on sale-purchase of units for a few more days, which he said had to be done since there were a large number of sellers and a few buyers of shares in the market, which did not make the stock prices representative.

“If we were to open up redemptions, those who redeem would be doing so at the cost of loyal unit holders,” NIT chief said.

He observed that the Trust holds Rs64 billion under management.

Most equity funds were going along with suspension, their argument the same as that of the NIT.

“Since there is no meaningful activity in major stocks, the price discovery is not possible,” says a manager with several funds under his belt.

He argued that the closing prices of stocks were not realistic and if Net Asset Value (NAV) were to be calculated on those prices, the redemption of units would be at the cost of those who were willing to remain invested in those funds.