Bonds Market in Pakistan

8/11/2019 Bonds Market in Pakistan

1/26

BONDS MARKET IN

PAKISTAN


2/26

BONDS MARKET IN PAKISTAN

1

Institute of Business Management

College of Business Management

Financial Institutions

Term Report

Submitted To:Sir Sharique Ayubi

Submitted By:

Farzeen Rais (14603)

Contact No: 0346-2816292


3/26


2

ACKNOWLEDGEMENT

I would like to take the opportunity to thank Almighty All ahfor all His blessings and helpthat He has bestowed upon me that I was able to use my mental capacities and work on this

report so productively.

I would also like to thank my respected teacher Sir Shar ique Ayubifor giving us the essential

knowledge of the course Financial Institutions, and without whom the completion of the

report would have been impossible, he not only guided me but made my concepts clear and

broaden my intellectual mind. Next, I would like to thank my father Mr Rais Ahmed and all

the employers of banksand fi nancial companieswho helped me in collecting the data and

survey method.

While working on this report, I gained immense insight and knowledge and it is hoped thatmy effort and ability is reflected in the hard work that has made this report possible.


4/26


5/26


4

INTRODUCTION

Bond Markets:

Debt markets are utilized by both firms and governments to raise reserves for long

term purposes, however most financing by firms is financed by retained profits. Bonds

are longterm borrowing.

Major issuers of securities are governments (Treasury securities in US, gilts in the

UK, Bunds in Germany) and firms, which issue corporate bonds.

Important characteristics of Bonds involve:

Residual matur i ty (redemption date):Over the long term, the leftover maturity of any

bond abbreviates. Bonds are ordered into 'short-term' (with satisfies five years);

'medium-term'(from five to fifteen years); 'long-term'(over fifteen years).

Bonds pay fixed rate of interest, called coupon. It is usually made in two portions, at

six-month to month interim, each one equivalent to half of the rate specified in the

bond's coupon.

The coupon divided by the par value of the bond (100 Euro) gives the coupon rate on

the bond. The par value of bonds is normally 100 Euro (or other currency).

Nonetheless, since the arrangements for issue require some time, economic situations

may change in such a path as to make the bonds ugly at their existing coupon at the

time they are offered available to be purchased. They will then must be sold at a

discount to 100 Euro, so as to make the coupon rate appropriate the market rate of

interest. If, vice versa, the market interestsrates fall, the coupon may make the bond

engaging at a cost over 100 Euro. In these cases the issuers cost has reached to the

point where the coupon expressed as a rate of the current price approximates the new

market rate.

Bonds prices fluctuate inversely with market interests rate:

If market rate rises, individuals like to hold the new, higher-yielding issues than

existing bonds. Existing bonds will be sold and their value will fall. Inevitably,

existing bonds with different coupons will be readily held, however just when there

are making a last-minute adjustment to the cost which they hope will make the

securities worthy to the market.


6/26


5

TYPES OF BONDS

Call able and Putable Bonds:

Callable bonds could be recovered at the issuersdiscretion preceding the specified

maturity (redemption) date. Putable bonds might be sold once more to the issuer on

specified dates, preceding the redemption date.

Convertible Bonds:

These are generally corporate bonds, issued with the option for holders to change over

into some other asset on specified terms at a future date. Transformation is ordinarily

into equities in the firm, however it might sometimes be into floating rate notes.

Eurobonds:

Eurobonds are bonds issued in a nation other than that of the currency of

denomination. In this way bonds issued in US dollars in London are Eurobonds, as are

yen bonds issued in New York. Eurobonds are issued by governments however all the

more usually by companies.

F loating Rate Notes (FRNs):

These are corporate securities where the coupon could be balanced at decided

beforehand intervals. The adjustment will be made by reference to some benchmark

rate, specified when the security is initially issued. A FRN may define, for instance,

that its coupon should be fifty premise focuses over six-month Treasury bill rate, or

six-month LIBOR, balanced at regular intervals. FRNs are, to some degree, a reaction

to high and variable inflation rates.

Foreign Bonds:

These are corporate bonds, issued in the country of denomination, by a firm based

outside that denomination. Hence, a US firm may issue a sterling bond in London.

Junk Bonds:

Junk Bonds are corporate Bonds whose issuers are regarded by bond credit rating

agencies as being of high hazard. They will convey a rate of interest no less than 200

basis points focuses over that for the corresponding bonds issued by high quality

borrowers.


7/26


8/26


7

an immediate signal as to the sustainability of fiscal policies, allowing

governments to adjust their policies. When consumer finance and

mortgages are linked to bond rates, an increase in bond rates has an

immediate political impact that politicians are unlikely to miss. Similarly,

bond markets exert a disciplinary influence on monetary policy. Excessivemonetary expansion builds up inflation expectations and pushes up long-

term rates. Bond yields respond quickly to policy decisions, and such

messages usually have a sobering effect on policymakers.

An active and liquid debt market facilitates the operation of monetary

policy. A well-functioning money market smoothly transmits rate changes

throughout the financial system, and has a quick impact on the economy.


9/26


8

BACKGROUND OF PAKISTAN BOND MARKET

In Pakistan, the improvement of money market and bond market sector was launched

in late 1990s after the liberalization changes; nonetheless, Pakistan security business

sector is grinding away starting stage and has a moderate pace of advancement, only

1% of GDP, as contrasted with different nations. Like other developing business, the

greater part of the obligation financing in done through bank borrowings. With the

concise vitality of security business sector, further this study illustrates the current

status of Pakistani bonds markets and real obstacles confronted by it. The first long

term bond issued in 1992 in this manner giving an open door to company to issue a

security by taking that long term yield curve as a security. Henceforth an arrangementbegin in 1995 when the first term Finance Certificate was sold in business then later

on in 2000 and Pakistan Investment bonds are sold by Government. Anyhow because

of the limited supply of governments securities a delegate long term yield curve had

not formed which constrained the development of corporate bond market.

Bonds Automated Trading System (BATS):

In 2009, a separate trading platform created particularly for exchanging of debt

securities was presented by KSE with the name of Bond Automated Trading System

which planned to give a trading interface suited to the needs of debt market

participants with suitable risk management and valuing mechanisms and looked to

uproot the anomalies present in the past model. This new initiative might give the

issuer advantageous liquidity era and elective method for raising obligation capital,

while the investors might have yield premium open door and investment choices in

expanded instruments. The TFCs might give a more extensive base to the capital

market, empowering investors the decision of going into debt or equity and maketremendously required profundity in the capital markets.

The BATs regulations which were affirmed by SECP in September 2009 restricted the

negotiated deal or off-market transactions outside Bats. Nonetheless, absolution is

continuously conceded by SECP for this limitation for most recent one year or so,

accordingly permitting the off-market sector transactions in the listed TFCs executed

outside Bats to the stock trades and limitations were forced in Central Depository

System (CDS) upon transfers of listed TFCs which did not meet the above condition.

Along these lines, the reporting arrangement of KSE was enhanced now gives the

facility of continuous reporting of off-market sector trade as contrasted with the at one


10/26


9

time relevant arrangement of reporting at the day end. Subsequently, the first phase of

bond market development is completed which speaks to improvement of a unified

reporting stage for all trades in the listed debt instruments.

Debt Security Trustees Regulations:

As part of its mandate to develop the bond market of Pakistan, the Securities and

Exchange Commission of Pakistan (SECP) approved Debt Securities Trustees

Regulations, 2012, which will give direction to the trustees in releasing their

obligations under the Trust Deeds.

The regulations enable the trustees to:

Consistently screen instalment of benefit/mark-up/interest to the debt

security holders and redemption of the securities

Regularly screen maintenance of the security, if any, backing the debt

instrument

Guarantee that compliance with the provisions of the Trust Deeds,

especially their covenants, are adhere to; and

Monitor the debt security holders' complaints are determined by the issuers.

Under the regulations, registration with the SECP has been made obligatory and just

scheduled banks, advancement finance institutions and investment finance companies

can act as debt security trustees.

The role of trustees in the issues of debt securities is of a critical nature as they

safeguard the interest of the debt security holders. The regulations will empower the

trustees to play their part all the more proactively, which will help building investor

confidence and lead to corporate bond market advancement.

The purpose for these regulations is to adequately manage affairs of the debt securitiestrustees and similar regulatory frameworks already exist in different emerged and

developed markets.


11/26


10

LITERATURE REVIEW

Literature 1:The study named, Bonds Market Development in Emerging Markets, SBP

Research Bull etin Volume 3, publi shed on November 1, 2007,and this research is

done by Ahmed M . Khalid.

This research paper explores the advancement of security market in developing

economies with a focus on Pakistan. The primary objectives of this research paper is

to investigate the reasons for a slow development of bond market in developing

economies.

From this research following bonds market of two countries i.e. Pakistan and India hasbeen discussed below:

India:

Recent good performance provides important descriptive statistics on the Bombay StockExchange. The total capitalization of all the worlds 53 emerging markets in1996 was aboutUS$1,900 billion. Indias stock market ranks among the top 10 with a capitalization ofUS$150 billion in 2002. This high capitalization to GDP makes the share market a far deeper

market than most of the emerging markets. The Bombay exchange may be counted as beingamong the top six following South Korea, Taiwan, Mexico, Thailand and Malaysia. Thevalue traded in Bombay is 3.5 per cent of the average of the 30 top markets of the world inthe 1990s (IFC reports).

Indias bond market is not well developed though the government bond issues are tradedwithin the financial institutions. There is a potentially large private market to be made withRupee 2,700 billion worth government bonds. There is also a tax-exempt bond mutual fundscheme with government securities. The capital market is still not international enough toattract foreign capital inflows. This changed in 1995-96 when much of the disinvestment in Southeast Asia led to large capital flows into the

Indian markets. This is in a sense not comforting as markets such as those in Karachi andBombay that liberalized faster went through speculative capital inflows, which, whenwithdrawn, destabilized their ability to provide steady streams of financing. While the Indiancompanies can access foreign markets for funds, likewise, foreign companies can invest inthe Indian financial institutions as well as by obtaining licenses to run financial institutions.This is designed to improve efficiency while also making it a lot cheaper to trade in themarket. An OTC market has been in operation since mid-1994, giving access to smaller firmsto list their shares: since then, small firms have another access through the automated nationalexchange, which is growing very fast as the number of newer firms are listing in the screentraded exchange. Eventually, this screen-based trading system is expected to unify theexchanges. These and other reforms on capital adequacy for brokers, greater and more

frequent disclosures, etc. are expected to provide opportunities for the large capital market inthat region to develop into a financial centre for that time zone in the future.


12/26


11

PakistanThe government created an auction market for short term Treasury bills and long-terminvestment bonds. The secondary market for government securities was likewise

settled. The Securities Department inside the SBP was set up to implement debtmanagement forums.

Mr. Ahmed M. Khalidfurther discussed that,

In 1998, there were three stock exchanges, in Karachi, Lahore, and Islamabad. The KSE isthe oldest, established in 1948, and accounts for the bulk of the countrys trading. As stated earlier, the 1991-93 period saw a major increase in trading at all three stock markets. Marketcapitalization at KSE alone increased from PRs 38 billion in 1987-88 to PRs 200 billion in1991-92. Similar trends were noticed at the other two markets in Lahore and Islamabad. This

pattern continued but was broken by downturns mainly due to political instability and

economic crises. M r. Ahmed M. Khalidobserved that stock market trading has shown thehighest performance during the first years of this century, but however, now bonds market inPakistan requires a lot of challenges and measures to accomplish the developed market of

bonds.

This research also discussed the stages of market developments in a sample of emerging

market economies. It compare both sets of countries and then draw lessons for Pakistan. It is

observed from this research is that Pakistan needs to satisfy a set of pre-requisites before

some meaningful progress in domestic bond market development is made. Following are thestages of development of bonds market which has been discussed in this research paper.

The development of Bonds market in a country involves three (3) stages:

Stage 1:

The business sector does not have a sizeable saving and investment opportunities available,

the intermediaries fail to offer the skills and experience, banks are shrink frail or somewherein the dominance prevailing that other business sector players are not urged to enter and the

capital market is immature. Additionally, regular indications of this starting stage are the

nonappearance of macroeconomic soundness, budgetary fragility and a well- organized

administrative framework. As being what is indicated, the government and the approach

creators need to create the fundamental standards for a security business to establish in the

most proficient way. The strategies of fiscal liberalization should joined together with

deregulation, market sector determined pricing mechanism, macroeconomic steadiness,

central bank changes, impetus component for business members and banking sector reforms.

In the meantime, the nation should start measures required for the making of a cash and

market.


13/26


12

Stage 2:

A nation appears to have alluring issuers yet restricted investor base, creating capital markets

and at last great macroeconomic and political nature. At this stage, further measures ought to

be taken to create an essential business sector of open and private securities. Nation might

likewise require open public company, and disclosure regulations. Ultimately, the nation

should have a Benchmark for pricing long maturities.

Stage 3:

Now, a nation must have sufficient issuers and investors, skilled intermediaries, great

macroeconomic and political nature. At this stage, the nation ought to create a developed

secondary market for securities. This will help pricing new issues. Credit rating agency must

have the capacity to handle an expansive number of issues. Disclosures rules need to be

strengthen. Training of individuals included is vital to clearly acknowledge about the market

hazard, the reward, best practices and other related relevant issues.


14/26


13

Continued from literature 1:

Following macro and micro issues in bonds market has also been taken from the

study, BondMarket Development in Emerging Markets: Prospects and Chal lenges

for Pakistanthis research has been done by Mr Ahmed M. Khal id. SBP Research,

VOL 3, November 1, 2007. This Research Scholar observed that Pakistan needs to

satisfy a set of perquisites before some meaningful progress in domestic bond market

development is made. Following is the brief discussion of micro and macro issues

from this research.

Macroeconomic Issues in Bonds Market:

The set of macroeconomic conditions incorporate fiscal discipline, financialconditions, decision of exchange rate regimes and overall financial sector

improvement. It appears to be unrealistic to arrange strategies for security market

development without creating certain standards of macroeconomic steadiness and

financial sector reforms. Inside these macroeconomic conditions, monetary control

takes the first inclination. Economic theory proposes that high level of amount of

financial deficiencies will build interest rates. These deficits will likewise increase the

danger of default and the cost of government debt, accordingly making it troublesome

to create a developed bond market in Pakistan.

Micro Issues in Bonds Market:

Market advancement for domestic bonds confronts a variety of challenges. At the

starting stage, the first and most critical issue in creating a security market is building

market participants. Developing economies face various issues in creating market

participants, for example, absence of incentives for issuers, absence of diversified

portfolio, and the nonappearance of a support market and instruments.


15/26


14

Literature 2:

This study has been taken from, I NTERDISCIPLI NARY JOURNAL OF

CONTEMPORARY RESEARCH IN BUSINESS Institute of Interdisciplinary Business

Research 256 (DECEMBER 2010 0 VOL 2, NO 8)

This study has the research topic, Future and Prospects of Bond Market Development in

Pakistan. It has been written by 3 PHD scholars, Department of Management Sciences,

Sajid Nazir , Atia Alam, and Muhammad Musarat Nawaz.

This literature is on future and prospects of bond market development is vast and growing.

The writing on future and prospects of bond market development is immense and

developing. Distinction analysts have discovered contrast obstructions and proposed

answers for help the procedure of bonds market development. Nonetheless, Mian

Sajid Nazir , Atia Alam, and Muhammad Musarat Nawaz (PHD Scholars,

Department of M anagement Sciences)have discussed in their research article, thefollowing prospects and obstructions which apply specifically to emerging market of

Pakistan.

Developing Benchmark Yield Curve:

Due to little trading of government and corporate securities long term yield curve had

not settled that had restricted the exchanging of private bonds. There are two principle

purposes behind non- existence of yield curve.

On account of government ownership the rate of return is low as it is not

market driven. However market requires higher rate that's why a large

portion of the auction bids are rejected. Further on, Institutional investors

and banks are pressurized to put resources into these securities even at low

premium rate. Regardless of the possibility that they contribute they are less

slanted towards its exchange and stay it with them until it held to maturity.

Due to less supply the prices of bonds increases, this increment in value is

only because of the supply and request not due to market magnetism of

these securities.These all factors limited the secondary market for these securities. A benchmark yield

curve is created by presenting an extensive number of securities in the business sector,

expansion exchanging of these securities and through expanding market by making

passage simple for both domesticated and outside investors. In 2006 PIBs closeout

indicates a legislature proposition towards the improvement of long term yield curve.

Crowding Out by Government Secur ities:

The government and corporations both are pooling stores for the same assets. Anyhow

the legislature securities giving returns at lower level rate. As contrasted with it theTFC has higher rate of return. The profit for TFC issued by companies has a rate of


16/26


17/26


16

purchasing and offering of securities. However in 1993, the Central Depository

Company of Pakistan Limited was made for the settlement.

Legal and Regulatory Structure:

Regulations of SECP in regards to bond issuance is significantly more confused andconvey time and expense with it as contrasted with the bank obtaining. No proper

regulatory framework exist at present for listed debt instruments which may help in

safeguarding the investors interest.

Shor tcomings in the L isted Regulations:

The existing regulations need to be further reinforced as for debt securities to

overcome following shortcomings:

essential information and undertakings at the time of issue

issuer/trustee obligations to provide trust deed and relevant information are not

specified

No provisions restricting the issuer or its senior executive to inform and explain

the reasons of defaults to the investors and no proposed remedies via a formal

meeting.

Mian Saji d Nazir , Atia Alam, and Muhammad Musarat Nawaz (PHD scholars,Department of M anagement Sciences)have also discussed in their research study,

about how the bonds market in Pakistan can overcome it ineffectiveness. Following

is the brief discussion of the scholarly researchers:

By suitable exposure of firm future development and danger, firms can pull in

huge gathering of investors at an ideal rate. Accessibility of information on

optional business transactions assumes a significant part in making the value

revelation prepare more effective prompting enhanced liquidity. A great part ofthe optional business sector exchanging information is now accessible on the

SBP site. This information support procedure could be further fortified by

giving the information on an authentic premise and in a promptly usable

structure. The stock trades ought to make it compulsory for their members to

report any obligation regarding debt securities transactions.

It is troublesome to cost altered pay securities having diverse attributes,

characteristics, agreements, prerequisites and danger natural in it. For this a

fitting money related investigators are obliged that are not accessible inPakistan. To beat this issue the administration ought to prevent its obtaining


18/26


17

from the SBP and spot a new supply of PIB in the market that will likewise

give a benchmark to the business. Bonds ought to be sold after issuing proper

schedule for its auction.

Government shoould build the piece of the pie by issue new long termsecurities having distinctive choices as stated by the sorts of investors at a

business sector prevailed premium rate so it might draw in a substantial number

of investors.

The government needs to acquaint an assessment impetus plan with enhance

capacities in the course of action, distribution and trading of bonds.

To draw a large number of domestic and foreign investors Bond market sector

should have a fitting legitimate and administrative system having characterizedguidelines and regulations identifying with the issuance, settlement,

enlistments, instalment and offering of securities. Express controls in regards to

checking and responsibility for both issuers or dealers and investors guarantees

open about safety and security level of their ventures.

Development of BATs as a centralized reporting platform for all trades in

listing debt instruments for proficient price discoveries of listed TFCs.

Further strengthening the Debt Securities Trustee Regulations by innovatingthe prudent amendments which will allow trustees to play their role more

proactively and will eventually build investors confidence.

Through awareness programs educate investors on the bond market in Pakistan.

For further expanding the bonds market; attract non-resident investors by

facilitating them with better opportunities to have positive yields by extension

of certain concessions like tax exemptions.

The new regulatory structure ought to additionally address the needs of a

derivative market for securities. Corporate influence and stronghold of global

standards for best practices is similarly vital. In the meantime, steps ought to be

taken to establish credit rating agency that might help issuers to comprehend

the risk of investment in a variety of investible choices and additionally

diversify hazard. Efforts should be made through courses and counselling

services where market participants can completely comprehend the risk return

trade-off. These measures might give incentives to market participants and are

expected to launch some trading activities.


19/26


20/26


19

CURRENT OPPOURNITIES

These opportuni ties are based on current updates.

The investors of bonds in Pakistan can avail the following new opportunities of Bonds

Market:

Pakistani conglomerate Engro Corporation plans to raise Rs4 billion ($40.9 million)

through listed sukuk (Islamic bonds). The sukuk would be secured and offered in two

tenorsa three-year Rs3 billion tranche with a 13% profit rate and a five-year Rs1

billion tranche with a 13.5% profit rate, the rating agency said. Engro has issued

sukuk before but on a much smaller scale as its fertiliser unit raised Rs2 million

through a six-month deal through private placement in 2012. The company isinvolved in sectors including food, polymers, fertilisers and power generation. Islamic

finance is expanding in Pakistan as a flurry of initiatives by regulators aims to develop

the industry.

K-Electric bonds: tapped the market in February and rose PRs. 6 billion through a

three-tranche retail sukuk.The TFCs, proposed to be listed in Karachi Stock

Exchange with 8 year maturity. the profit rates (KIBOR + spread) on K-Electric

Sukuk when weighed against comparable instruments as mentioned above, offer a

premium of 84 bps, 29 bps and 35 bps on the Sukuk issues of 13 months, 3 years and

5 years, respectively.

Tameer Microfinance Bank Limited (TMFB), a commercial bank in Pakistan that is

majority-held by Norwegian mobile firm Telenor, recently issued two term finance

certificates (TFCs) each worth PKR 500 million (USD 5 million) on the Karachi

Stock Exchange (KSE) in an effort to raise capital. The first TFC will reportedly have

a term of 13 months with an annual return of 12 percent. The second TFC will have a

term of 24 months with an annual return of 12.5 percent.

The domestic market, Treet Corporation Limited have also announced to raise

Rs1.255 billion through issuance of Participation Term Certificate (PTC). PTC is aconvertible and redeemable bond structure, which would not only deliver an interest

payment but also issue a predetermined number of shares till its maturity.*


21/26


22/26


21

QUESTIONNAIRE RESULTS

The following result table shows the responses of the presented questionnaire for the significance of

Bonds Market in Pakistan.

S.NO Questions Results

01 What do you think is more

preferable?

85% =Term Finance Certificates

15% = Government securities

02 For businessmen or owners, how

do you finance your business

sector?

68% = Borrowings

27% = Equity

5 % = Securities

03 How do you measure Interest

rate on bonds?

74% = Low

25% = Average

1% = High

04 What do you think is there

proper platform for trading of

bonds in Pakistan?

55% = Maybe

40 % = No

5 % = Yes

05 Are you willing to put your

resources in the bonds market in

Pakistan?

58% = Yes

30 % = Maybe

12% = No

06 What do you think about the

prices of bonds?

66% = High

31% = Average

3% = Low


23/26


22

DISCUSSION OF THE RESULTS

Following is the analysis of the results from questionnaire:

Almost there was every sample saying that TFCs are most preferable. The reason would beits high interest rate than government securities and they are less risk hazard comparativelygovernment securities.

68% said they prefer financing through borrowings. Maybe borrowing is the simplestresource for the growth and expansion of business although if the debt is not properlymanaged they could run into trouble. 5% are for securities. Hence there is low awareness ofthe securities or the bonds market in Pakistan is not well developed yet. 27 % said equityfinancing, they should keep on mind that it requires returns that could be more than the ratethey could have paid for interest on bank loans.

74% of investors said they arent satisfy with the yield. That means the rate of return onbonds is low which is not market driven. 25% investors said maybe they are satisfy with theyield and only 1% is completely satisfy with yield on bonds.

55% were indifferent about the platforms of bonds trading, it would have been because theyare least focused to the bonds market. 40% indicate there is no proper platform of bondstrading that means until now BATS have not gained that much effectiveness and popularity.Hence BATS require more to be effective in its role.

58% said yes they can invest in bonds market, 30% are indifferent whether to invest or not,maybe if the bonds market in Pakistan would be successful in issuing favourable bonds i.e.

interest is market driven then these 30% can be the investors of the bonds market. 12% arefor no investment in bonds market, these 20% would be very risk adverse and least aware ofthe bonds.

To testify the demand and supply of bonds price, I asked a sample group whether the pricesof bonds are high low or average, 66% of the investors said the prices of bonds are high. Thisclearly signifies that there is no match between demand and supply in the price discovery of

bonds. 31% agree that the bonds prices are average.


24/26


23

CONCLUSION

Security Markets can ce progressively turn into a significant source of financing for theprivate and public sectors in Pakistan. Corporate financing in Pakistan, similar too there

merging markets, is ruled by bank advancing and issuance of value stocks. There are various

points of interest to improvement in the domestic bond market to harmonize the banking

sectors. These incorporate expanded financial stability, more competitive financial sector,

more efficient allocation of credit, and an overall sorted out and enhanced portfolio of assets.

The bond market in Pakistan is confronting great development since its initiation in 1995. As

of late, more fiscal foundations are concentrating on the term finance certificate as contrasted

with non-financial firms. Despite the fact that the local bond market sector is developing and

issuance of nearby securities is expanding throughout the year; on the other hand, there are a

few obstacles to security market improvement still exist which incorporates absence of longterm bench-mark rates as an after effect of thin secondary market for sovereign securities,

crowding out of the government securities and some regulatory boundaries in term of high

trading expense.

There is a yet let to do by the controllers to backing the bond market development and

advancement. This could be improved by consistently issuing local currency securities at

market rates paying little respect to financing needs, focusing issuance on numerous lengths

of developments and diminishing obtaining from unfunded sources. The liquidity of the bond

market could be upgraded by fortifying information and valuable data spread in regards tocorporate security transactions, and permitting short offering. Miscellaneous expenses in

terms of stamp obligation and managerial expenses should be decrease to make bonds

issuance more cost effective.


25/26


24

APPENDIX

Questionnaire for the Bonds Market in Pakistan

Name: __________________________ Age: ________

1)What do you think is more preferable?

Term Finance Certificates

Government Securities

2) For businessmen and owners, how do you finance your business/ banking sector?

Securities Borrowings

Equity

3) How do you measure Interest rate on bonds?

High

Low

Average

4) What do you think is there proper platform for trading of bonds in Pakistan?

Yes

No

Maybe

5)Are you willing to put your resources in the bonds market in Pakistan?

Yes

No

Maybe

6)Are you willing to put your resources in the bonds market in Pakistan?

High

Low

Average

Thank you


26/26


REFERENCES

Ahmed M. Khalid, Bonds Market Development in Emerging Markets, SBP Research Bullitin

Volume 3, published on November 1, 2007,

Fabella, R. and Madhur, S. (2003), Bond Market Development in East Asia: Issues and

Challenges, Asian Development Working Paper Series ERD-35, Economics and Research

Department.

Edwards A. K., Harris L. E., Piwowar M. S. (2007). Corporate Bond Market Transaction

Costs and Transparency, Journal of Finance, No. 62(3), p. 14211454.

Ariff,Mohamed and Ahmed M. Khalid (2005). Liberalization and Growth in Asia: 21st

Century Challenges. Edward Elgar Publishing Company, U.K., 399 p.

Sajid Nazir, Atia Alam, and Muhammad Musarat Nawaz (2010) Interdisciplinary journal of

contemporary research in business, vol 2, no. 8, future and prospect bonds development

market in Pakistan, Institute of Interdisciplinary Business Research 256

Bonds Market in Pakistan

Documents