KARACHI: The eighth exchange-traded fund (ETF) — which is a basket of companies traded on a stock exchange like a single stock — will get listed on the national bourse on Sept 11.
A relatively new investing product for the Pakistani market, ETFs let investors take exposure to a wide range of stocks and fixed-income instruments at once without having to conduct company-specific research. In other words, the retail value of an ETF “unit” reflects the cumulative performance of a number of underlying securities.
The JS Global Banking Sector ETF, which will start trading on the day of its listing, will be managed by brokerage firm JS Global Capital Ltd. The ETF will track the performance of the JS Global Banking Sector Index as its benchmark.
Even though ETFs command a large asset base of nearly $10 trillion globally, their uptake has been slow in Pakistan. The first ETF was launched in 2020 and their total number is still in single digits three years on.
Existing ETFs are focused on different segments of the market such as consumer companies, banking companies and Shariah-compliant companies. This means ordinary investors can buy units in a single ETF of their choice and expect the value of their investment move in tandem with the collective performance by the basket of shares that constitute the same ETF.
Despite the PSX’s push to popularise ETFs, these funds have consistently attracted low volumes. Many of the ETFs record low volumes — ranging anywhere from 500 units to 2,000 units — on most days.
According to analysts, low volumes in ETFs are a direct outcome of a lack of awareness among investors. In addition, many ETFs are run by asset management companies that also sell competing products like equity funds, which invariably earn them significantly higher fees.
Published in Dawn, September 9th, 2023
