PSX, funds expect growth as institutions barred from investment in NSS

KARACHI: Stocks market and mutual funds on Monday cheered the ban on institutional investment in savings schemes on prospects of capital market’s growth.

Farrukh Khan, managing director of Pakistan Stock Exchange (PSX) said National Saving Schemes (NSS) are ultimately for the individual and vulnerable members of the society and they are best invested in by these citizens.

“The reform process initiated will enable the government to help such citizens better, while reducing the cost and managing the maturity of such debt with greater certainty,” Khan said in a statement.

”This will also help to develop a proper yield curve and grow the capital markets in Pakistan, which is essential to improve the very low savings and investment rates in the country.” Maheen Rahman, chairperson of Mutual Funds Association of Pakistan said the recent changes in various regulatory requirements would greatly help the mutual fund industry gain a wider footprint across the country.

“The mutual funds industry stands ready to grow, expand, and dedicate our collective efforts and resources towards the establishment of a wider presence of investment through mutual funds which will help contribute towards increasing the savings rate and expansion of capital markets in the country,” Rahman said.

The government last week banned institutional investments in national savings schemes to redirect them to other parts of the financial sector. The Central Directorate of National Savings has investment portfolio of Rs4 trillion and out of that around Rs500 billion is from Employees Old-Age Benefits Institution and non-profit organisations.

PSX hoped that the government and regulators will accept other proposals presented to streamline and reform the capital markets, including revamping the non-banking financial company regulatory structure in line with international best practices, introducing regulatory framework and instruments for infrastructure funds, continuing reforms in

the national savings schemes with respect to pricing, which will help reduce the

interest rate / pricing risk of the government, and better manage its debt maturity profile.

The government took various initiatives and reforms that include regulatory amendments for launch of exchange traded funds, revamping of the real estate investment trust regulations, reduction in annual monitoring fees for mutual funds and pension funds, the removal of tax anomalies for the mutual funds industry, book building of the energy sukuks through competitive book building at the PSX platform in line with international best practices and the expansion in allowable expenses on mutual funds.

These changes are expected to go a long way towards development of vibrant capital markets and greater investor participation.