Pakistan Stock Exchange (PSX) has launched two new exchange-traded funds to attract investors toward a novel concept of investment diversified across multiple securities, according to news reports.
The exchange-traded funds are namely are: Meezan Pakistan ETF, offered by Al Meezan Investment Management and NBP (National Bank of Pakistan) Pakistan Growth ETF, offered by NBP Funds Management Ltd.
Two other ETFs have already been listed on the stock market, namely UBL (United Bank Limited) Pakistan Enterprise ETF is offered by UBL Fund Managers and NIT (National Investment Trust) Pakistan Gateway ETF is offered by NIT.
The launch of exchange-traded funds earlier this year was part of the ongoing efforts to bring Pakistan’s capital markets on par with global peers.
While volumes of the two old exchange-traded funds have been thin, it must not be forgotten that this is a new concept in Pakistan and will take time to grow, Brokerage JS Global said. The overall volumes on the local bourse have improved significantly and investors should eventually start eyeing ETFs.
JS Global said that as more asset management companies come up with new ETFs, investors will have a wider variety of themes to choose from.
Considering the above, foreign investors, particularly overseas Pakistanis and retail investors in general with limited market information might find these to be attractive investment options.
Exchange-traded funds allow investors to gain diversified exposure to a basket of underlying securities under a single banner. ETFs can be considered hybrid security. They trade on the bourse just like equity securities while the price is derived from the underlying assets, much like mutual funds. Generally considered passive investments that aim to track the movement of a specified benchmark, ETFs have globally gained popularity among large retail investors. The assets invested in the global ETF industry reached nearly $6.3 trillion by end of last year.
Blackrock and Vanguard are among the globally known asset management companies that offer a number of ETFs that track various benchmarks. ETFs can be traded at any time during the session due to liquidity ensured by the market maker through real-time pricing using complex computer programs.