BMA CHUNDRIGAR ROAD SAVINGS FUND (BCSF)
The BMA Chundrigar Road Savings Fund seeks to provide its investors with an attractive rate of return by investing in all fixed income and money market instruments of medium risk and short duration. The fund will seek to maintain a rupee weighted average maturity for the investment portfolio of not more than 5 years.
|Fund Type||Open End|
|Category||Aggressive Income Fund|
|Benchmark||1 Year KIBOR|
|Cut‐off time||4:00 PM|
|Front end Load||upto 1%|
|Back End Load||Nil|
|Fund Stability Rating||A+ (F) (PACRA)|
|Auditor||Ernst & Young|
|Transfer Agent||Technology Trade|
|Legal Advisors||KMS Law Associates|
|Management Quality Rating||AM3|
|*This includes 0.37% of SECP Fee & Govt. Levy|
During July’17, the fund posted a return of 4.26% against the benchmark return of 5.98%, underperformed by 172bps. The current allocation of the fund is as follows: 58.21% invested in Cash, 6.32% invested in PIBs, 17.88% placed with a Bank as TDR, 8.94% in TFC(Pre-IPO) and 8.76% in commercial papers. Portfolio’s standard deviation was 0.02% in first month of FY18. Portfolio weighted average maturity was at 393 days. Based on recent developments at macro front, we believe that current allocation is quite attractive. However, we will rebalance the same incase of any uncertain event. The fund’s protfolio is more inclined towards daily products, short tenor investments and floating rate instruments.
PORTFOLIO RATING PROFILE
CPI inflation in July’17 increased by 2.9%YoY/0.3%MoM as compared to 3.9%YoY/-0.4%MoM in June’17. The current level of inflation is primarily driven by lower food inflation (0.7%YoY) which has the largest weight (35%) in the CPI basket. We are expecting CPI inflation to remain soft till 3QFY18 and according to our estimates it will be 4.1%-4.3% in FY18 and this estimate is sensitive to following factors i) rebasing of the CPI which is due in 2018 ii) boost in public and private expenditures in light of upcoming elections iii) expected currency devaluation.
State Bank of Pakistan in its MPS of July’17 has kept the policy rate unchanged at 5.75%. The Monetary Policy Statement (MPS) highlighted benign inflation outlook and strengthening aggregate demand as two key positives while mentioned deteriorating external account position in the shape of widening current account deficit as a critical balance of payments challenge.
As per latest data, Current Account Deficit (CAD) showed little respite in Jun’17, recording USD1.43bn (vs USD1.65bn in May’17). As a result, CAD in FY17 came in at highest level in eight years at USD12.1bn (4.0% of GDP) vs USD4.9bn (1.7% of GDP) last year. CAD increase is primarily led by (i) 17.5% YoY jump in imports to USD48.5bn (where ~40% of the increase is due to rise in machinery imports – positive for fixed investment and growth), and (ii) lackluster performance of exports (down 1.4% YoY at USD21.7bn) and remittances ( down 3% YoY at USD19.3bn).
Country’s total foreign reserves stood at USD 20.28bn as of July 28, 2017. We believe the debt repayment ahead and the widening CAD to put the forex reserves under pressure, which have already dropped from peak level of 24bn. Rupee devalued 3.1% in a single day during the first week of the month, however recovered immediately after the intervention from the ministry of finance.
In the PIB auction held during the month; Central bank raised Rs. 54.45bn. The cut‐off yield for 3 years, 5 years and 10 years tenor remained unchanged at 6.41%, 6.90% and 7.94% respectively, while no bids were accepted in 20 year tenor. The government also raised PkR1,646bn in T-bills auctions during the month.
Disclosure: The scheme has maintained provisions against Workers’ Welfare Fund (WWF) liability to the tune of Rs. 142,576 as of Jun 30 , 2015 . Had the provision not been made, the NAV per unit/percentage return of the Fund would be higher by Rs. 0.002/0.02%. Details are specified at note 8.1 to the latest period ended report of Jun 2016. Performance data does not include the cost incurred directly by an investor in the form of sales load etc. Effective from July 1, 2015 no provision is being made as mutual funds have been excluded from levy of WWF vide Finance Act 2015.