Lackluster performance of Islamic Money Market Fund in Sept 11

By Riffat Mughal


KARACHI: Islamic Money Market Funds and Islamic Cash Funds performed lackluster in the month of September, 2011 as the net assets of the category decreased by 9.83 percent Month-on-Month (MoM) to Rs 6,892.176 million.


The previous month, recorded a surge in net asset by 9.15 percent MoM to Rs 7,643.277 million.

This particular category includes three Islamic Money Market and Islamic Cash Funds including Meezan Cash Fund, ABL Islamic Cash Fund and HBL Islamic Money Market Fund.

The weighted average annualized return of all the three funds was 11.57 percent for September, 2011 which declined from 11.63 percent reported in August, 2011.

Limited activity was seen in the sukuk market during the month. Due to the fact that market expected further cut in the rates, investors expected lower return on money market funds for the time being and some of them may have shifted to equity funds in search of higher returns on their investments.



Meezan Cash Fund

Meezan Cash Fund (MCF) net assets declined by 10.84 percent in the month of September, 2011 as it reached Rs 5,807 million as compared to Rs 6,513 million in the previous month. MCF has provided an annualized return of 11.7 percent for the month of September, 2011 as against its benchmark which provided return of 8.4 percent during the same period under review.

Net Asset Value (NAV) per unit as of September 31, 2011 was recorded at Rs 50.14 as compared to Rs 50.12 as of August 31, 2011. Since it is an income fund which regularly pays dividends, the stability and low movement in NAV is understandable.

ABL Islamic Cash Fund

ABL Islamic Cash Fund’s (ABL-ICF) net assets declined by 6.97 percent to Rs 674.559 million as at September 30, 2011, as compared to Rs 725.116 million as at August 31, 2011. ABL-ICF annualized return was 11.22 percent for the month of September, 2011 as against its benchmark which provided return of 8.15 percent during the same period. Despite significant volatility in money market yields, ABL-ICF was able to provide competitive returns.

ABL-ICF’s Net Asset Value (NAV) as of September 30, 2011 was recorded at Rs 10.0146 as compared to Rs 10.1997 as of August 31, 2011.

HBL Islamic Money Market Fund

HBL Islamic Money Market Fund (HBL-IMMF) net assets slightly improved in the month of September, 2011, it went up by meager 1.35 percent to Rs 410.617 million as compared to Rs 405.161 million in the previous month. During the month, the fund has registered annualized return of 10.42 percent against the benchmark of 7.05 percent.

Net Asset Value (NAV) as of September 30, 2011 was recorded at Rs 102.5724 as compared to Rs 101.7017 as of August 31, 2011 as it is an income fund which regularly pays dividends, the stability and low movement in NAV is logical.

Money Market Overview

Among Islamic Money Market and Islamic Cash Funds, HBL Islamic Money Market Fund performed well as it showed 1.35 percent growth in its net assets in the month of September, 2011.

During the month, money market remained highly illiquid. KIBOR rates depicted downward trend due to the anticipation of a cut in the discount rate in latest monetary policy. The six month KIBOR rate fell by 13 bps to close at 13.25 percent.

To normalize the liquidity situation, State Bank conducted OMOs and injected around Rs 1,024 billion at weighted average yield of 13.21 percent while it also mopped up around Rs 32 billion through outright sale of 21 day paper at a yield of 13.46 percent.

On a positive note, inflation declined to 10.46 percent YoY for September, due to re-constitution of the CPI basket. This led to renewed expectations of a handsome cut in the Discount Rate. On the forex front, rupee depreciated against dollar by Rs 0.17 to close at Rs 87.50 per dollar in the interbank market.

http://www.halaltamweel.com/1889/PAKISTAN-Mutual%20Funds-Halal-Funds-ISLAMIC-BANKING-ISLAMIC-FINANCE.aspx