Interview with Syed Ali Raza Bukhari — Head of SMAs, National Investment Trust Limited
PAGE: Tell me something about yourself and your career please?
Syed Ali Raza Bukhari: Prior to joining National Investment Trust Limited as the Head of SMAs, I have had the opportunity to set up and successfully manage a Pakistan Stock Exchange Member Brokerage Firm, bringing it up as boutique institutional trading platform. I have also been associated with the asset management industry for quite some time now, spreading my plus 15 years of specialized financial services experience into a diversified landscape of multiple professional domains like marketing/sales, advisory, distribution, product development, stock brokerage and operations. I have also had the honor to have represented our financial markets on myriad investment forums in Pakistan with a couple in UAE and China, alike.
PAGE: Could you please tell us about the savings and investment trends in Pakistan?
Syed Ali Raza Bukhari: If you look at the banking deposits in totality, the total deposits grew from Rs.14,000 billion in June 2019 to Rs.16,200 billion in June 2020 posting a growth of 16% whereas if only the deposits of salaried, self-employed and other individuals are looked into, the amount shows a persistent growth from Rs.6,900 billion in June 2019 to Rs.8,000 billion in June 2020 posting a stable and sticky growth of 17% in the given period.
In terms of the mutual funds industry alone, as an avenue for investments and savings, the Assets under Management (AUMs) have posted a promising growth, with figures as stated ahead. The number of active individual investors, if may looked into, have also grown from 300,000 in June 2019 to 330,000 in August 2020, albeit slowly but persistently. It may subtly include duplication of individual investor accounts, but still means growth. The relative value of individual investors has also grown from Rs.200 billion in June 2019 to Rs.300 billion in August 2020 posting a substantial growth of 50% in this period alone. The individual’s average daily gross buying volumes of 140 million shares on our local bourse in October last year vis-à-vis 245 million shares of average daily gross buying volumes in October 2020 todate, is again showing nothing but a positive trend of investments in Pakistan. Local buying volumes have substantially picked up from July 2020, which is evidently depicting growing confidence and interest in the markets.
PAGE: How much interest does the foreign investors exhibit in the stock exchange of Pakistan?
Syed Ali Raza Bukhari: Sifting through the Foreign Portfolio Investment figures of our market, it vividly portrays growing foreign investor’s confidence on our bourse. The average daily gross buying volumes of foreign investors stood at 16 million shares in October last year whereas in October 2020 to date, the average daily gross buying volumes, in the foreign portfolio, have so far stood at 21 million shares, whilst staying in a net selling zone of 7 million shares, by far. Even though the foreign individuals have been meagerly in the net selling zone, but this sparse individual’s outflow was primarily compensated by the healthy and generous buying patterns of our overseas Pakistanis who have shown very keen interest in the market, especially post June 2020.
So based on a very generic trend analysis, I feel confident that the overseas Pakistanis will continue to keep buying our markets at these attractive levels, followed by increasing interest of the foreign individuals to come, though completely dependent on many macro factors combined.
PAGE: Your views on the performance of mutual funds sector over the period of last two years?
Syed Ali Raza Bukhari: The total AUMs of the Asset Management industry stood at Rs.679 billion in June 2018 whereas in June 2020 the AUMs stood at Rs.802 billion posting a cumulative industry growth of 18% in two years. Nonetheless, if we look at June 2019 figures, the AUMs grew from Rs.578 billion to Rs.802 billion in June 2020 and Rs.878 billion in Aug 2020 alone, posting a growth of 39% (YoY) and 52% from June 2019 to August 2020, respectively, depicting strength and confidence in the interests of the savers in Pakistan.
The number of funds mushroomed from 190 in June 2018 to 224 funds in August 2020. The Money Market category seem to have been the favorite investment avenue because of its low risk profiling, whereby the category alone stood at Rs.146 billion in June 2018 to only have witnessed a whopping cumulative growth of 130% by August 2020, reaching Rs.336 billion.
PAGE: Which sectors could perform well and which sectors would face difficult times during the current year?
Syed Ali Raza Bukhari: Our market is currently trading at a multiple of 7.2x as compared to the peer market average price earnings of 14x, keeping us at a discount of 48% in the regional perspective. Our market dividend yield is hovering around 6% vis-à-vis 3% that of the peer average of our regional markets, adequately adjusted to all the inherent risks of our market. Currently, though rolling in a positive direction, any further direction of the market may be dictated by a few loud factors like the verdict of the FATF plenary session which is already underway and well incorporated, alongwith any possibility of reemergence of COVID-19 in these winters leading to possibilities smart lockdowns. Further on, based on global recessionary factors, lowering of Pakistan’s projected GDP growth and increasing unemployment levels may also be the catalyst for negative market sentiments. Nonetheless, fundamentally the market valuations are extremely attractive and all main stream sectors are poised to post positive earnings growth in the current year. Cements, automobile assemblers, fertilizers, followed by banks and OMCs, to name a few.