ISLAMABAD: The Privatisation Commission has approached the Securities and Exchange Commission of Pakistan (SECP) for introduction of margin financing in capital markets to pave the way for floating OGDCL convertible bonds.
The commission has written to the finance ministry seeking reintroduction of margin financing in the capital markets to increase market volumes and obtain better value for the planned convertible bonds.
The PC expects to generate $3 billion in three months through convertible bonds of OGDC, PSO and Pakistan Petroleum Limited (PPL).
SECP chairman Salman Ali Sheikh will hold a meeting with Minister of Privatisation Senator Waqar Ahmed on Wednesday (today) to discuss the issue.
Talking to Dawn Senator Waqar said that the capital markets had the potential to invite local and foreign investments but the lack of financing has limited the market growth.
“With the major markets still in the recovery phase, the mega investors feel safe to invest in the developing markets as it is low cost investments,” he said.
Meanwhile, speaking at the Senate standing committee on Privatisation here on Tuesday the minister said that there was a need for improving the market dynamics.
The market volumes should stand at around $700 to $800 million,” Senator Waqar said, adding that currently, the market volumes were between $40 to 50 million only.
The minister said that when the margin financing is introduced the volumes would jack up to $150 to $200 million in the short run.
He informed the meeting about his communications with global financial managers, who gave an encouraging response over the planned convertible bonds by Pakistan.
He said that after the local markets improve the convertible bonds of OGDCL would be launched at the international markets that can fetch between $750 million and $1 billion for the company.
Senator Waqar has also offered the Karachi Electric Supply Company (KESC) that his ministry would extend all possible support to the power utility company for raising capital through the convertible bonds.
The presentation prepared by the PC for floating of bonds revealed that OGDCL bonds can fetch 30 per cent premium at 4 per cent rate of return.
Currently, there is no mode of financing available for small investors in the stock markets.
The traditional mode of financing was ‘badla’ that was replaced by Continuous Financing System (CFS) and later the CSF –II was introduced, which was also discontinued in early 2009 and now the market is based only on cash transactions.
However, the SECP has approved margin financing but it has yet to be ratified by the concerned quarters.
Source The News
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