Alfalah GHP Investment Management Ltd will be listing its first exchange-traded fund (ETF) next week (January 17,2022). The fund will be named “Alfalah Consumer Index Exchange Traded Fund” and will allow investors to access a basket of companies in the Consumer Spending Sector while providing growth opportunities with a diversified selection of stocks.

The ETF will track the Alfalah Farmer Consumer Index, a benchmark index of 20 stocks across seven sectors that are directly benefiting from growing consumer demand in the country.

It will be the sixth Exchange Traded Fund on the Pakistan Stock Exchange (PSX).

The consumer-oriented industries in the Alfalah Consumer Index Exchange Traded Fund will be cement (four companies), Engineering (four companies), textile composites (four companies), Automobile assembly (two companies), food and personal care (two companies), Oil Marketing Companies (two companies) and Pharmaceuticals (two companies).

The index will get rebalanced every six months to include the largest companies with the highest market capitalization based weightage in all seven sectors. In addition, it will include shares with an average daily turnover for one year of 100,000 shares or more. Investors will be able to buy and sell the said ETF in a lot size of 500 units with a par value of Rs. 10.

Exchange Traded Funds have failed to gain Investors Interest at PSX. Total fund size of all Exchange Traded Fund’s at PSX is roughly PKR199 million. In comparison, Total Fund Size of All Stock Funds stands at PKR ~143 billion according to MUFAP.

Lack of Marketing and Awareness by PSX and respective AMCs, low appetite of Investors for ETFs and overall dampened Market sentiments have led to failure of ETFs in Pakistan.

Alfalah Consumer Index Exchange Traded Fund Price and Outlook

Alfalah Consumer Index Exchange Traded Fund is likely to meet the same cold response from the market. The said ETF is not focusing on Index Heavy Weights. The top 25 stocks in the Benchmark KSE100 Index has cumulative weight of 66% in the Index. Out of Top 25 Stocks, the Alfalah Consumer Index Exchange Traded Fund will be missing out on Stocks which have 55% weightage in the KSE100 Index. This includes Stocks from Banking, Oil & Gas Exploration, Technology and Chemicals Sector where fund will not be investing.

Hence, the ETF will be significantly deviating from Index Weightage, hence missing out on the Any upside movement of the KSE100 Index. In Contrast, most of the ETFs available in the market are focused on KSE100 Index, providing Investors the opportunity to bet on the Index Movement. While, Alfalah Consumer Index Exchange Traded Fund will be investing a very selective niche which do not have Investors focus.

Alfalah Consumer Index Exchange Traded Fund will be launched by Alfalah GHP Investment Management Limited, a Mid-Tier Asset Management Company. The External Rating of the Alfalah AMC is ‘AM2+’. In Contrast, ETFs currently available in the market were launched by Asset Management Companies who had much better External Rating then Alfalah GHP Investment Management Limited.

According to MUFAP, Alfalah GHP Stock Fund and Alpha funds (Alfalah’s flagship funds) have retuned loss of 0.35 percent in last one year, widely underperforming other stock funds where Returns varied from positive 0.2% to 13.5%.

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