Karachi: The HCB DCF Income Fund has released its quarterly review for the period ending September 30, 2023. Amid significant economic shifts and developments within Pakistan, the fund showed a marked increase in performance.
The start of the new fiscal year saw Pakistan securing a Stand-by Arrangement (SBA) facility of USD 3 billion from the IMF, with an immediate disbursement of USD 1.2 billion. Following this, Pakistan received an additional USD 3 billion from Saudi Arabia and the UAE and experienced a rollover from China. Such inflows contributed to an upgrade in Pakistan's sovereign rating by Fitch, moving from CCC- to CCC, signaling an improved external outlook.
However, macroeconomic concerns were reignited in August 2023, following a political transition to a new interim government. Efforts by the new finance team to clear pending import payments were perceived by speculators as indicative of a weakening external account. Consequently, the rupee's value against the dollar fell, reaching PKR 307 in interbank rates, with open market rates around PKR 330. The interim government then took measures against dollar smuggling and abuse related to Afghan Transit, which facilitated a recovery in the exchange rate and reduced the disparity between open market and interbank rates.
For the first two months of fiscal year 2024, Pakistan posted a current account deficit of USD 0.9 billion, a 54% year-over-year decline from the USD 2.0 billion deficit in the same period the previous year. This improvement was largely due to a narrowing trade deficit, with a 26.0% decrease in imports significantly outpacing the 8.3% decrease in exports. Pakistan's foreign exchange reserves also grew, reaching USD 7.6 billion by the end of September 2023, up from USD 4.5 billion at the previous fiscal year's end.
In terms of inflation, the Consumer Price Index (CPI) averaged 29.0% during 1QFY24, an increase from 25.1% in the corresponding period the previous year. The State Bank of Pakistan (SBP) maintained its monetary policy stance in September 2023, observing that inflation was projected to decline and real interest rates were expected to remain positive.
Regarding GDP, the growth was recorded at 0.29% for FY23. The agricultural and services sectors saw growths of 1.6% and 0.9%, respectively. However, the industrial sector witnessed a 2.9% decline, attributed to high interest rates and import restrictions. The Federal Board of Revenue (FBR) tax collection for 1QFY24 was PKR 2,041 billion, surpassing the target by PKR 63 billion.
For the HCB DCF Income Fund specifically, it achieved an annualized return of 19.93% during the review period, while its benchmark return was 23.89%. The fund's investments were primarily in T-Bills, cash, and GOP Ijara Sukuks. The fund's net assets increased by 24.02%, reaching Rs. 9,557 million by September 30, 2023, up from Rs. 7,706 million as of June 30, 2023.
Within the mutual fund industry, the net assets of open-end mutual funds increased by approximately 14.7% during 1QFY24, amounting to PKR 1,793 billion. Money Market funds continued to dominate, holding a 58.2% share as of the end of September 2023.
The board extended its gratitude to the fund's stakeholders, the Securities and Exchange Commission of Pakistan, and the fund's trustees for their continued support and cooperation.