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Tuesday, December 5, 2023

Why is the mutual fund market growing rapidly?

According to the Kazakhstan Stock Exchange (KASE), at the beginning of the second quarter of 2021, there were 13 mutual funds under the management of six management companies and 4 ETFs in the Securities of Investment Funds sector. The volume of trades for the three months of this year amounted to 17.3 billion tenge, having increased by 28 times compared to the first quarter of last year .

According to the deputy chairman of the board of KASE Natalia Khoroshevskaya, mutual funds, including exchange-traded investment funds, are actively gaining popularity against the background of volatility of stock markets, as well as due to the expansion of the list of offered instruments.

If at the beginning of 2020 only 7 securities of investment funds were offered on the KASE floor, then as of June 1, 2021 their list has expanded to 17 items. This happened due to the inclusion of mutual funds managed by JSC “Halyk Finance”, JSC “BCC Invest”, JSC “First Heartland Jysan Invest”, LLC “East-West”, as well as two ETFs on global shares of gold mining companies and companies from the clean energy sector , explained Natalya Khoroshevskaya.

“As the list of securities of investment funds expanded, the trading volume increased from 616.1 million tenge as of April 1, 2020 to 21.7 billion tenge by the end of five months of 2021, including 19.5 billion tenge accounted for trading in securities new mutual funds “, – she stressed.

KASE Deputy Chairperson noted that due to large trading volumes, the commissions of mutual funds are often lower than the market ones, which makes them popular among investors. “In addition, the increase in value from the sale of mutual investments is not taxed if the fund’s securities are traded on an organized market, and on an unorganized market they are subject to IIT at a rate of 10%,” added Natalya Khoroshevskaya.

At the same time, starting from 2021, shares and shares of risk investment funds have been admitted to circulation on KASE. “This will be one of the first steps that will provide an opportunity for retail investors to participate in start-up projects, pre-IPO stories, interesting progressive projects and real sector tools,” said Natalya Khoroshevskaya. All this, of course, increases the attractiveness of the stock market, she is sure.

It is obvious that the risk financing fund must meet certain criteria of the regulator, including the number of holders of the investment fund’s securities and the presence of a market maker.

“However, one should not forget that the securities of such funds are intended only for qualified investors,” the deputy chairman of the board of KASE noted. At the same time, the brokerage organization independently exercises control so that these instruments are purchased only at the expense of qualified investors, she explained. Individuals interact on the exchange floor only through brokerage / management companies.

According to the chairman of the board of the SkyBridge Invest management company Sholpan Ainabayeva, now the group of private investors who have neither experience nor significant savings comes to the stock market. And mutual fund for such unqualified investors is the most convenient format.

A mutual fund is an opportunity to get a diversified portfolio for little money, she said. For example, for 30-50 thousand tenge, such an investor will be able to buy only one or two shares of Kazakh telecom or several shares of Kaz TransOil. By purchasing a share in a mutual fund, he has the opportunity to own part of a portfolio of several securities from different issuers, explains Sholpan Ainabaeva.

“Until the end of the year, I think the growth of the segment of mutual funds trading on the stock exchange will continue. This is facilitated by low deposit rates, the expansion of the information field about the possibilities of the securities market, the arrival of commercial banks in brokerage activities and the availability of convenient mechanisms on the stock exchange, ”she said.

In addition, as part of the latest initiatives of the regulator in the segment of mutual funds, management companies are allowed to buy shares on the stock exchange and be their market makers.

For any instrument traded on the exchange, it is very important to have a market maker. After all, an investor, choosing and investing in one or another unit investment fund, must think in advance about the mechanism for exiting the investment, explains Sholpan Ainabaeva. “It is very difficult for a management company to find market makers from among other management companies, it is absolutely logical that the management company itself should act as such a market maker,” she says. According to her, lifting the ban and allowing management companies to be a market maker for mutual funds actually increases the liquidity and turnover of exchange trading in shares.

“Considering that now management companies are allowed to act as market makers of their own mutual funds, we predict that positive dynamics will continue in the exchange segment this year,” says another expert, Chairman of the Board of Halyk Finance Farhad Okhonov. In turn, he notes that since the beginning of this year, the total assets of interval mutual funds managed by Halyk Finance have doubled, in proportion to the increase in the number of unit holders.

Farhad Okhonov also recalled legislative innovations that came into force in October last year, which significantly simplified the process of opening brokerage accounts. “Now documents for opening a brokerage account can be confirmed using an SMS-code, and not only signed by hand or by means of an EDS. In addition, the professional participants of the securities market were given the opportunity to remotely biometric identification of potential customers using the services of the state database of individuals, ”he said. Thus, when opening a brokerage account, the client does not need to provide an identity document, and in addition, the use of these services minimizes the risk of fraudulent activities for the broker.

In general, we can conclude that as awareness grows, the population is increasingly considering mutual funds as a convenient alternative or addition to private investment. Also, the active transition of management companies to the online format through the introduction of their own mobile applications encourages an increasing number of new investors to perform operations in the stock market.

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