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Chapter – 7.

CAPITAL MARKETS

Capital market in Pakistan have two main components namely; (i) an equity market represented by the stockexchanges and; (ii) an intermediated financial system dominated by an increasing number of non-bank financialinstitutions (NBFIs). The capital market in Pakistan has been witnessing rapid progress over the years amidststructural reforms in both its institutional set-up and operational matters since 1999-2000. The Government haspromoted capital market developments through various fiscal incentives and policy inducement. Extensive reformsare aimed at strengthening the system and bringing the stock market of Pakistan at par with the leading stockexchanges of the world. The booming stock market of Pakistan is providing a breeding ground to the prospectiveinvestors for new and promising joint ventures. The buoyant mood in Pakistan’s stock markets prevailed for the lasttwo years has broadened investor base. The Karachi Stock Exchange (KSE) share index and aggregate marketcapitalization (AMC) recorded an increase of 41.1 percent and 48.3 percent, respectively in FY05 and the KarachiStock Market remained as one of the best performing markets around the world, for the last two years.

In the fiscal year 2004-05, 15 new companies listed their shares worth Rs 26.06 billion on the KSE. Some megaofferings of Pakistan Petroleum, Kot Addu Power and United Bank were made through the privatization process.Likewise, debt securities also witnessed 7 new listings worth Rs 9.13 billion. Despite the high volatility experienced atthe end of the third quarter of fiscal year 2004-05, the market gained its momentum and remained as one of the “Bestperforming Stock market” among some of the top equity markets of the world in 2005. Stock market in Pakistan hasemerged as an important source of new capital for industrial and commercial establishment.

Fiscal year 2005-06 continued to maintain its strong performance and achieved new heights by creating many newrecords. The KSE-100 Index crossed the barrier of 12000 mark for the first time in the history of capital market andtouched an all time high on April 13, 2006. The KSE-100 index made further inroad and reached 12274 points onApril 17, 2006 showing a growth of 64.7 percent over June 2005. Between December 2005 and April 2006 alone, theKSE share index increased by 25 percent. Similarly, the total market capitalization also increased to Rs 3419.4 billionon April 17, 2006 (US$ 57.0 billion) from Rs 2013.2 ($ 33.7 billion) showing a growth of 70 percent over June 2005.At current levels, KSE’s market capitalization is equivalent to about 44.3 percent of estimated GDP of FY06.

The improved performance of the stock market can mainly be attributed to consistent and transparent economicpolicies resulting in strong economic growth; a successful privatization process attracting foreign investors inprestigious organization like PTCL and National Refinery; sound monetary policy of the SBP, maintenance of fiscal

discipline and the capital market reforms including development measures introduced and adopted by the stockexchanges with full support and guidance of the apex regulator, SECP. The government’s economic policies andcapital market reforms helped in promoting a fair, efficient and transparent capital market on the one hand, and alsoresulted in attracting investment and restoring investors’ confidence in the capital market on the other hand. Theprivatization of the government entities through the bourses helped to broad base the equity ownership to asignificant level, indicative by as many as 1.4 million applications received for offering of Kot Addu Power Company.

The buying euphoria in the stock market has been spurred by a number of other favourable factors includingcontinuation of the present policies on banking sector by the SBP, renewed interest of large number of buyers of shares, bright prospect of reaping dividends, good capital gains and presence of institutional investors in the market.While, OGDC, cement and the banking sectors led the rally at KSE, taking it to historically high at 12274 points on



Economic Survey 2005-06

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17th April 2006, banking and cement were the most sought after stocks and OGDC was the volume leader. The KSEsaw robust activity especially during the first 4 months of 2006, with all vital indicators pointing in the right direction.The stock market is likely to maintain its bullish trend by the end of the current fiscal year.

The monthly trends of the leading stock market indicators are given in Table 7.1 and Fig: 1 (a) and (b).

Table-7.1 : Leading Stock Market Indicators on KSE, (KSE Index: November 1991=1000)

2004-05 2005-06 (July -Apri l)

MonthsKSE Index

(end month)

MarketCapitalization(Rs. billion )(end month)

Turnover of Shares(billion)

KSE Index(end month)

MarketCapitalization(Rs. billion )(end month)

Turnover of Share

(billion)

July 5209.9 1410.2 5.4 7179.0 2013.7 3.1August 5346.2 1440.5 4.6 7796.9 2132.5 5.0September 5217.7 1425.8 4.7 8225.6 2329.7 7.9October 5332.2 1456.8 5.2 8247.3 2340.8 6.5November 5567.8 1524.2 3.9 9025.9 2551.2 7.5December 6218.4 1696.1 10.4 9556.6 2709.5 7.4January 6747.4 1840.5 12.2 10524.2 2990.3 8.5February 8260.1 2262.7 14.0 11456.3 3221.2 10.3March 7770.3 2114.8 11.2 11485.9 3218.5 8.1April 7104.7 2022.9 4.9 11342.2 3198.6 6.1May 6857.7 1792.8 6.1June 7450.1 2013.2 5.6

Source: Karachi Stock Exchange

Fig 1. (b) Market Capitalization in KSE

1200

1400

1600

1800

2000

2200

2400

2600

2800

3000

3200

3400

3600

J u l ( 0 4 - 0 5 )

S e p t

N o v

J a n

M a r

M a y

J u l ( 0 5 - 0 6 )

S e p t

N o v

J a n

M a r

R s .

B i l l i o n

Market Capitalization

Out of the 16 leading stock markets in the world, the KSE share index increased by 53.6 percent in terms of USdollar during July-May 11, 2005-06, surpassed only by India and South Korea (Table-7.2 and Fig-2). The KSE 100has been one of the best performing emerging markets in the recent past. In the past four years, with compoundannual growth rate (CAGR) of 56 percent, it has performed better than many emerging markets. It is pertinent tomention here that all the 16 leading stock markets of the world posted positive growth in the current fiscal year ranging from 4.5 percent (New Zealand) to 67.5 percent (India). This indicates that the world economic recoverycontinued in the current fiscal year.

Fig-1 (a): Trends in KSE Index

500

1,991

3,482

4,972

6,463

7,954

9,445

10,936

12,426

13,917

May -02 No v-02 May -03 No v-03 May -04 No v-04 May -05 No v-05 May -06

B a s i s P t s .



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Fig-2: Performance of Global Markets (June-May 11,

2005-06)

0

20

40

60

P ak i s t an

I n d i a

I n d on e s i a

T ai w an

S o u t h

K or e a

H on g

K on g

M al a y s i a

J a p an

S i n g a p or e

S r i L ank a

C h i n a

P h i l i p pi n e s

A u s t r al i a

U S

U K N

ew

Z e al an d

% C

h a n g e i n U S $

Table-7.2 : Performance of Global Stock Markets during July-May 11, 2005-06

Index (in local currency terms)Country

May 11, 2006 30-June 2005% Change in USD

Pakistan 11,531.31 7,450.12 53.6

India 12,435.41 7,193.85 67.5

Indonesia 1,553.06 1,122.38 54.3

Taiwan 7,361.45 6,241.94 18.7

South Korea 1,464.70 1,008.16 60.5

Hong Kong 17,140.78 14,201.06 21.0

Malaysia 966.05 888.32 15.4

Japan 16,862.14 11,584.01 46.4

Singapore 2,620.58 2,212.66 27.8

Sri Lanka 2,235.50 1,897.78 14.8

China 1,545.69 1,080.94 47.8

Philippines 2,550.79 1,924.33 44.3

Australia 5,318.20 4,229.90 28.4

US 1,305.92 1,191.33 9.6

UK 6,042.00 5,113.20 24.2

New Zealand 3,738.15 3,246.49 4.5

Source: Invisor Securities.

The Securities and Exchange Commission of Pakistan

(SECP) has been actively pursuing a capital market

reform program geared towards the development of a

modern and efficient corporate sector and capital

market, based on sound regulatory principles that

provide impetus for high economic growth. The reformsintroduced over recent years in the fields of risk

management, governance and transparency have

contributed significantly towards the growth and

development of capital market and building investor

confidence. Various reform initiatives introduced during

the outgoing fiscal year are documented in Annexure-1.

Sectoral Performance

During the period from July 2005 to March 2006 the listed capital on KSE increased from Rs 438.49 billion to Rs

486.49 billion, reflecting an increase of around 11 percent. The market capitalization increased from Rs 2,071.18

billion to Rs 3,257.06 billion reflecting an increase of over 57 percent in the value of shares. Similarly, the averagedaily turnover of shares increased from 430 million to 462 million shares. The KSE 100 Index increased from 7450.1

points in June 2005 to 11485.9 as on March 31, 2006, reflecting an increase of about 54.2 percent. The KSE 100

index surpassed all the previous record and touched all time high on April 17, 2006 and stood at 12277.8 points.

During the calendar year 2004, total profit before taxation of the 12 trading groups amounted to Rs 229.5 billion,

which increased to Rs 326.3 billion in 2005 recording a growth of 42.2 percent. All the trading groups and companies

except cotton and textile showed unprecedented growth during the first nine months of the outgoing fiscal year. Their

performances are discussed below (Tables 7.3-7.6).




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Table-7.3 : Sectoral Performance on Karachi Stock Exchange (Percent)

General Index Market Capitalization

July-March (Growth%)July-March(Growth %)

AMC(Rs billion)*Sector

2004-05 2005-06 2004-05 2005-06 2005* 2006*1. Cotton and other Textiles 19.3 -0.8 34.3 10.4 119.2 113.62. Pharmaceuticals & Chemicals -1.6 46.9 23.3 59.8 195.8 272.63. Engineering 46.1 42.2 70.4 40.0 11.5 13.04. Auto & Allied 28.7 55.6 22.2 68.2 47.3 67.65. Cables and Electrical Goods -2.2 55.6 29.2 94.5 9.3 17.76. Sugar & Allied 41.2 44.3 33.4 46.1 14.8 18.77. Paper & Board 11.8 14.1 -7.8 30.7 15.1 21.78. Cement 2.5 129.2 16.0 145.6 75.5 168.09. Fuel & Energy 63.7 19.2 87.1 44.6 909.0 1287.910. Transport & Communication 54.9 17.3 60.0 11.7 309.7 318.711. Banks other Financial Institutions 0.5 56.6 59.8 160.3 298.9 770.312. Miscellaneous 9.6 13.1 10.5 34.0 108.5 148.7

13. Overall/Total 22.8 41.7 55.8 59.9 2114.8 3218.514. KSE Share Index 47.2 54.2 0 0 0 0

Source: State Bank of Pakistan* End March 2005 and 2006.

Cotton and Other Textiles: In this group there are three sub-groups: (a) textile spinning,(b) textile weaving & composite, and (c) other textiles. There were 213 companies listed with the KSE under thisgroup in December 2005. The share index of cotton and other textiles slightly declined by 0.8 percent during the firstnine months of the current fiscal year as compared to a growth of 19.3 percent in the same period last year. Itsmarket capitalization however increased by 10.4 percent or by Rs 10.7 billion during July-March 2005-06.

Pharmaceuticals & Chemicals: A total of 35 companies were listed with the KSE under this group at the end of December 2005. During the first nine months of the current fiscal year its share index has increased by 46.9 percentas compared to a decline of 1.6 percent in the comparable period of last year. Its market capitalization increased by arecord 102 billion during July-March 2005-06 and stood at Rs 272.6 billion on 31st March 2006, showing an increaseof 59.8 percent over June 2005.

Auto and Allied: A total of 25 companies were listed with the KSE under this group at the end of December 2005. Itsshare index increased by 55.6 percent, while its market capitalization increased by 68.2 percent during the first ninemonths of the current fiscal year.

Sugar and Allied: Under this group, a total of 37 companies were listed with the KSE with a market capitalization of Rs 18.7 billion. During the first three quarters of the current fiscal year. The share index of sugar and allied posted agrowth of 44.3 percent as compared to a rise of 41.2 percent in the comparable period last year.

Cement: At the end of 2005, there were 21 cement companies listed with the KSE. The cement industry was one of the best performing sectors in the stock market. Its market capitalization increased to Rs 168 billion on March 31,2006 from Rs 68.4 billion in June 2005, recording a growth of 145.6 percent or an increase of almost Rs 100 billion.Cement was the second fastest growing sector in the KSE after banks and other financial institution.

Fuel & Energy: A total of 28 companies were listed with the KSE. It is the most dominant group in the stock market.Its share index grew by 19.2 percent during the first nine months of the current fiscal year. Its market capitalizationincreased by Rs 397.0 billion to Rs 1287.9 billion in March 2006 from Rs 890.9 billion in June 2005. Its marketcapitalization constituted 40.0 percent of the aggregate market capitalization in March 2006. In the corresponding



Capital Markets

107

date of the last year market capitalization of this group was 43.0 percent. A swelling fuel and energy sector continuedto be one of the major market players in the current year along with transport and communication, banking andfinance, and cement. The energy sector has been identified as an engine of growth along with 3 other sectors,(agriculture, small and medium enterprises and information technology) by the government. Companies like OGDC,

PSO, SNGC, SSGC, Hub Power, and Pakistan Oil Fields etc. led the current year’s upsurge in the stock market.These companies were the main pillars of the stock market boom in the out-going fiscal year.

Transport & Communication: At the end of 2005, there were 17 companies of this group listed with the KSE. Itsshare index and market capitalization increased by 17.3 percent and 11.7 percent respectively during July-March2005-06 as compared to their rises of 54.9 percent and 60.0 percent respectively in the same period last year. Itsmarket capitalization at Rs 318.7 billion constituted 9.9 percent of the aggregate market capitalization (AMC) inMarch 2006.

Banks & Other Financial Institutions: In December 2005, a total of 164 companies were listed with the KSE.There are 4 sub groups in this group: banks & investment companies, modarabas, leasing companies, andinsurance. During the current fiscal year, the share index of this group has increased by 56.6 percent as compared to

a marginal growth of 0.5 percent in the same period last year. Its market capitalization increased by a record 160.3percent making it the fastest growing business entity at KSE. The combined market capitalization of fuel and energy,and transport & communication and banking and other financial institutions was Rs 2376.9 billion on March 31, 2006,which constituted 73.9 percent of the AMC (Rs 3218.5 billion) as compared to their share of 71.8 percent on thecorresponding date of last year.

Miscellaneous: The miscellaneous group includes five sub-groups: jute, food & allied, glass & ceramics, vanaspati &allied, and others. In December 2005, a total of 87 companies were listed with the KSE. Its share index and marketcapitalization posted growth of 13.1 percent and 34.0 percent respectively in the first nine months of the current fiscalyear, as compared to their growth of 9.6 percent and 10.5 percent in the same period last year.

In December 2005, a total of 661 companies were listed on the Karachi Stock Exchange, including 213 companies in

cotton and other textile, 164 in banks and financial institutions, 87 in miscellaneous group. In December 2004 a totalof 663 companies were listed with KSE. As per the annual report of the KSE 2005, a total of 78 companies were de-listed between 2000-05, including 5 companies in 2000, 12 companies in 2001, 24 companies in 2002, 8 companiesin 2003, 18 companies in 2004 and 11 companies in 2005. During the same period a total of 74 companies were alsomerged including one companies in 2000, 7 companies in 2001, 16 companies in 2002, 8 companies in 2003, 39companies in 2004 and 3 companies in 2005. In the calendar year 2005, the number of dividend paying companieswas 300 compared to 282 companies in 2004. In 2005, 431 companies were profit making and 138 companies wereshown as loss making. The ratio was 422 and 141 in 2004. The total before taxation profit of the 12 trading groups,listed with the KSE, amounted to Rs 229.5 billion in 2004, which increased to a record of Rs 326.3 billion in 2005,showing a growth of 42.2 percent. In the year 2005 all the 12 trading groups were shown as profit making rangingfrom Rs 1.5 billion (engineering) to Rs 110.6 billion, (Fuel & energy). Fuel & energy, banks and other financialinstitutions and transport & communication groups were the most important players in the stock market, earning

highest ever profits. Fuel and energy earned a pre-taxation profit of Rs 110.6 billion in 2005 as compared to Rs 70.2billion it earned in 2004. Banks and other financial institutions with a pre-taxation profit of Rs 92.8 billion was thesecond biggest profit-earning group in 2005 as compared to Rs 49.9 billion in 2004. Transport and communicationearned pre-tax profit of Rs 42.2 billion during 2005. Commercial Banks with a pre-tax profit of Rs 69.6 billion toppedthe list followed by oil and gas exploration companies (Rs 68.1 billion). Other sectors, which earned higher pre-taxation profit during 2005 were technology and communication (Rs 41.4 billion) and pharmaceuticals and chemicals(Rs 28.3 billion). Profit motivation was the most important force behind the bullish fervour in the stock market duringthe out going fiscal year. The group-wise number of companies and their performance is given in Table 7.4.




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Table-7.4 : Companies Listed on KSE and their Before Tax Profits

S.

NoName of Sector

No. of

Companies2004 2005

Profit BeforeTaxation

(Rs billion)2004 2005

DividendPaying

Companies2004 2005

Profit Making

Companies2004 2005

Loss making

Companies2004 2005

1. Cotton & other Textile 217 213 9.0 10.5 62 59 111 122 69 55

2.Pharmaceutical &Chemical

38 35 22.9 28.3 24 24 30 28 6 6

3. Engineering 14 13 1.7 1.5 7 5 9 10 1 04. Auto & Allied 25 25 9.8 11.6 13 15 19 20 3 2

5,Cables & ElectricGoods

10 09 1.2 1.9 4 5 6 5 0 2

6. Sugar & Allied 37 37 1.1 2.5 11 20 23 24 12 127. Paper & Board 13 12 2.2 2.4 7 8 9 9 2 28. Cement 21 21 4.9 10.4 10 9 15 16 5 59. Fuel & Energy 26 28 70.2 110.6 19 16 22 20 2 7

10. Transport &Communication 14 17 46.8 40.2 4 6 9 11 3 4

11.Bank & FinancialInstitutions

159 164 49.9 92.8 81 99 118 120 18 19

12. Miscellaneous 89 87 10.4 13.6 40 34 51 46 20 24Total 663 661 229.5 326.3 282 300 422 431 141 138


The KSE is primarily influenced by some big blue chip companies including; OGDC, PTCL, Pakistan State Oil etc.During the first three quarters of the current fiscal year, the combined turnover of shares of ten big companies(OGDC, PTCL, Bank of Punjab, D.G. Khan cement, Fauji Fertilizer Bin Qasim, Pakistan Oil Field, National Bank of Pakistan, Muslim Commercial Bank, Pakistan State Oil and Hub Power Company) was 12.1 billion, which constituted18.8 percent of the total turnover at the KSE. These ten companies earned a profit after taxation of Rs 95.5 billion in

the current fiscal year up to March 2006. Out of Rs 95.5 billion profit after tax, the share of PTCL and OGDC was Rs59.6 billion representing 62.4 percent of the ten big companies. In the first nine months of 2005-06, PTCL’s after taxation profit was Rs 26.6 billion. The price-earning ratio of the ten big companies ranged from 4.94 in the case of Hub Power Company to 26.7 in respect of National Bank of Pakistan. This indicates that the business environment inthe current fiscal year has improved appreciably for the blue chip companies. (Details in Table 7.5).

Table-7.5 : Price Earning Ratio July 2005 – March 2006

CompanyNo.of Shares (in

billion)Profit Af ter Tax (Rs

billion)EPS Rate P/E Ratio

P.T.C.L. 3.8 26.6 7.05 65.65 9.31Oil & Gas Development 4.3 33.0 7.67 157.60 20.56National Bank of Pakistan 0.6 6.2 10.57 282.50 26.74

D.G. Khan Cement 0.2 1.7 9.12 151.10 16.56Fauji Fertilizer Bin Qasim 0.9 1.8 1.96 42.55 21.71Bank of Punjab 0.3 2.4 8.21 91.00 11.09MCB Bank Ltd. 0.5 8.9 17.43 225.05 12.91Pakistan State Oil 0.2 5.7 33.17 373.00 11.25Pakistan Oil Fields 0.1 3.8 28.63 624.50 21.81Hub Power Company 1.2 5.4 4.65 23.00 4.94Total/Average 12.1 95.5 1285 203.60 -




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Table-7.6 : Profile of Karachi Stock Exchange

2002-03 2003-04 2004-052005-06

(July-March)a) Number of Listed Companies

b) New Companies Listed

c) Fund Mobilized(Rs Billion)

d) Listed Capital(Rs Billion)

e) Turnover of Share( Billion Nos)

f) Average daily Turnover of Share (in

million)

g) Aggregate Market Capitalisation (RsBillion)

702

2

23.8

300.9

53.1

257.0

755.8

668

16

70.7

374.1

97.0

420.7

1357.5

659

15

54.0

-

88.3

-

2013.2

663

27

58.2

486.5

64.3

462.4

3215.5

Source: Karachi Stock Exchange.

Unprecedented growth in the leading market indicators was also witnessed in Lahore and Islamabad StockExchanges. The turnover of shares on the Lahore Stock Exchange (LSE) during July-March 2005-06 was 11.9 billioncompared to 14.0 billion shares in the same period last year. Total paid up capital with the LSE increased from Rs403.0 billion in June 2005 to Rs 448.0 billion in March 2006. The LSE index, which was 3762 points in June 2005,increased to 5510 points in March 2006. The market capitalization of the LSE has increased from Rs 1995 billion inJune 2005 to Rs 3026 billion in March 2006. Six new companies were listed with the LSE during July-March 2005-06,as compared to 7 companies in the same period last year. A profile of LSE is given in Table-7.7.

Table-7.7 : Profile of Lahore Stock Exchange

2002-03 2003-04 2004-052005-06

(July-March)Number of Listed companiesNew Companies ListedFund Mobilized(Rs Billion)Listed Capital(Rs Billion)Turnover of Share(Billion Nos)

Average daily shares (in mln)LSE IndexMarket Capitalization (Rs bln)

5612

4.1

280.1

28.2

115.52034.6751.2

53419

51.3

361.5

19.9

80.92828.3*1406.2

5249-

402.9

17.5

69.53762.31995.2

5246

37.2

447.7

11.9

65.45510.03025.7

* The LSE launched the new LSE-25 index in December 2002. Source: Lahore Stock Exchange

The overall trend in the Islamabad Stock Exchange (ISE) remained bullish during the period from July 01, 2005 toMarch 31, 2006. The ISE 10 index opened at 2438.79 points and while closing at 3387.3 on March 31, 2006; it hasshowed a growth of 39 percent. The pace of listing remained slow and only five new securities were listed at the ISE.The trade volume of ISE remained low as compared to last year. On regulatory side, some important developmentsalso occurred. The ISE was the first exchange, which complied with the direction of the Federal Government byincorporating the changes in regulations for electing a non-broker Chairman of the Exchange. The ISE started




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functioning in August 1992 and within 14 years it has developed into a vibrant, efficient and stable market. A profile of the ISE is given in Table 7.8.

Table-7.8 : Profile of Islamabad Stock Exchange

2002-03 2003-04 2004-052005-06

(July-March)Number of Listed CompaniesNew Companies ListedFund Mobilized(Rs billion)Listed Capital(Rs billion)Turnover of Share(In Billion Nos)Average Daily Turnover of Share(in million)ISE Network Index

Market Capitalization (Rs.bln)

2601

11.5

233.0

2.1

8.4

8210.1

547.0

2486

14.5

287.5

1.5

6.0

11894.4

1082.9

2326

23.2

337.3

0.7

2.6

11541.4

1558.4

2395

1.2

364.1

0.2

1.7

13479.1

2469.8Source: Islamabad Stock Exchange

The total funds mobilized during July-March 2005-06 in the three stock exchanges (KSE, LSE & ISE) amounted to Rs96.6 billion, as compared to Rs 90.1 billion in the last fiscal year. The total turnover of shares in the three stockexchanges during the first three-quarters of the current fiscal year was 76.4 billion, compared to 88.5 billion shares inthe same period last year.

Mutual Funds

Mutual Funds is an institution established for investing a pool of funds in various type of Securities for the benefit of investors. A small investor is unable to diversify his portfolio of funds simply because of high investment required for

diversification. Mutual funds, therefore, provides a means of diversification of investment by small investors. Initially amutual fund collect the funds from small investors, and when sufficient funds are gathered, then they are investedinto the Securities of different types, thus diversifying the portfolio. A management company manages a mutual fund.The management company is a bank of human resources, considered to be professionally qualified personnel. A“Portfolio Manager”, whose responsibility is to be invested in, and satisfies the desire of the investors, manages theportfolio of mutual fund.

There are two types of mutual funds, which are: (i) open-end mutual funds (ii) closed-end mutual funds. Open-endmutual funds are those where subscription and redemption of shares are allowed on a continuous basis. The price atwhich the shares of open-end funds offered for subscription and redemption is determined by the net asset value(NAV) after adjusting for any sales load or redemption fee. In Pakistan there exists thirteen open ended mutual fundslisted at Karachi Stock Exchange. Closed-end mutual funds are those where the shares are initially offered to the

public and are then traded in the secondary market. The trading usually occurs at a slight discount to the NAV. Over a period of time, the mutual fund managers have developed a variety of investment products to cater for therequirement of investors, having different needs.

A mutual fund can generate profits from three different sources, namely; (i) dividend, (ii) capital gains, (iii)appreciation of share price. Mutual fund generates income from dividends received from other joint stock companieswhose shares the fund holds. A mutual fund uses this dividend income to distribute dividend to its own stockholders.The capital gain generated by the mutual fund is also used to pay dividends to the investors of the fund. Mutual fundsalso increase the wealth/investment of their shareholder through appreciations of share price of the mutual fund.



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111

Currently thirteen open end and twenty-three closed-ended mutual funds are listed at Karachi Stock Exchange andthere are many more funds in the pipeline. The mutual funds industry in Pakistan is worth about Rs 120 billion andabout half a dozen open fund management companies are making progress. Presently the number of funds is over 30. During the calendar year 2005, 22 close-end mutual fund made a total profit of Rs 7.55 billion as compared to Rs

5.26 billion profit made by 16 close-end mutual fund during 2004. The State Bank of Pakistan has allowed mutualfunds operating in Pakistan to invest abroad. But initially the SBP has placed a cap of $ 15 million on suchinvestment by a single mutual fund at a given time.

Development Finance Instituti ons (DFIs)

During 2004-05, the DFIs disbursed Rs 24.7 billion and in the first six months of the current fiscal year (2005-06) theydisbursed of Rs 10.6 billion. The loans disbursed by the specialized banks during 2004-05 amounted to Rs 47.0billion, while, during the first six months of the current fiscal year, their disbursements amounted to Rs 23.1 billion.The Islamic Banks disbursed Rs 43.4 billion during 2004-05 while their disbursements were Rs 24.4 billion during thefirst six months of 2005-06. During 2004-05, Khushali Bank disbursed an amount of Rs 2.3 billion and during the firstsix months of 2005-06 its disbursement amounted to Rs 1.4 billion. All other Micro Credit Banks disbursed Rs 0.50

billion in 2004-05 while their disbursement during July-December 2005-06 amounted to Rs 0.4 billion. In the first ninemonths of the current financial year, sanctions and disbursements of the investment banks were recorded at Rs 8.0billion and Rs 7.26 billion respectively. Total sanctions and disbursements of the housing finance companies (HFCs)amounted to Rs 0.43 billion and Rs 0.28 billion respectively in the first nine months of 2005-06. The leasingcompanies sanctioned an amount of Rs 18.55 billion out of which they disbursed Rs 18.28 billion while themodarabas sanctioned Rs 7.13 billion and disbursed Rs 6.94 billion, respectively in the first nine months of 2005-06.

National Savings Schemes (NSS)

The Central directorate of National Savings (CDNS) is an attached department of the Finance Division and performdeposit bank functions by selling government securities through a network of 367 savings centers, spread all over thecountry. There are about 6 million investors in national Saving Schemes (NSS). Presently, Defence SavingCertificates, Regular Income Certificates, Special Savings Certificates/ Accounts, Bahbood Saving Certificates,

Savings Account, Pensioners’ Benefit Account and prize Bonds are in operation. Some of the popular schemes arediscussed below:

Defence Savings Certificates: Defence Savings Certificates were introduced by the Government of Pakistan in theyear 1966 and are available in denominations ranging from Rs 500 to Rs 1,000,000/-. These certificates are issuedfor 10 years but encashable any time after one month. The certificates purchased on or after 01-07-2005 earncompound profit @ 9.46 percent per annum on maturity. The profits on the deposits exceeding Rs 150,000/- issubject to a withholding tax @ 10 percent. Zakat is collected only once at the time of actual encashment. Thesecertificates are available at National Savings Centres, Pakistan Post Offices and the State Bank of Pakistan. Therewas withdrawal amounting to Rs 19.0 billion during July-March of the out-going fiscal year on this scheme.

Bahbood Saving Certificates: This is a new scheme with 10 years maturity and has exclusively been launched for

widows only. It offers profit on monthly basis. Presently on an investment of Rs 100,000/- the investor gets amonthly profit of Rs 920/- per months. The profit earned through this scheme is exempt from the compulsorydeduction of Zakat and with holding tax. Premature encashment before completion of one, two, three, and four yearsentails service charges. The certificates are available in the denominations of Rs 5000/-, 10,000/-, Rs 50,000/-, Rs100,000/-, and Rs 500,000/-. The minimum deposit limit in this scheme is Rs 5000/- while the maximum limit is Rs3,000,000/-. These certificates are available at the National Saving Centers only.

Pensioners’ Benefit Account: The PBA has specifically been launched for retired employees of government,autonomous bodies and armed forces. It offers profit on monthly basis. Presently on an investment of Rs 100,000/-the investor gets a monthly profit of Rs 920/-. The profit earned through this scheme is exempt from a compulsorydeduction of Zakat and withholding tax. Premature encashment before completion of one, two, three, and four years




112

entails service charges. A maximum of Rs 3,000,000/- can be invested in this scheme in three installments.

Prize Bonds: This is a bearer type security available in denominations of Rs 200, Rs 750, Rs 1500, Rs 7,500, Rs15,000 and 40,000. No fixed return is paid but prize draws are held on a quarterly basis. Tax at the rate of 10 percent

of the prize money is deducted at source.

During the fiscal year 2004-05, net deposits with National Saving Schemes declined by Rs 39.4 billion as comparedto a net increase of Rs 10.6 billion in 2003-04. In 2004-05 huge retirements were made in the case of Special SavingCertificates (Rs 83.3 billion), Regular Income Certificates (Rs 40.7 billion) and Defence Savings Certificates (Rs 8.7billion). Net accruals on the other hand increased in respect of Bahbood Saving Certificates (Rs 60.7 billion),Pensioners Benefit Accounts (Rs 17.7 billion) and National prize Bonds (Rs 9.4 billion). (Table 7.9)

Table-7.9 : Net Accruals by National Saving Schemes (Rs Billion)

July-March2002-03 2003-04 2004-05

2004-05 2005-06Defence Saving Certificates

Special Saving CertificatesRegistered

Special Saving Accounts

Regular Income Certificates

Pensioner’s Benefit Accounts

Bahbood Savings Certificates

National Prize Bonds

Others

Grand Total

22.0

84.9

5.1

-14.9

10.2

-

26.8

9.1

143.2

3.2

-13.2

2.9

-49.1

13.2

22.7

22.8

13.1

10.6

-8.7

-83.3

-1.9

-40.7

17.7

60.7

9.4

7.5

-39.4

-5.4

-42.2

-1.8

-34.1

15.0

49.9

5.2

2.5

-10.9

-5.2

-45.3

-0.9

-11.4

14.0

50.1

3.3

1.5

6.1

Source: Directorate of National Savings.

Net accruals with the NSS increased by Rs 6.1 billion during July-March 2005-06 as against a decline of Rs 10.9billion in the same period last year (Table 7.9). The Defence Savings Certificates, Special Saving Certificates,Regular Income Certificates, Savings Account and Special Saving Account have shown negative net receipts whilethe Bahbood Savings Certificates, Pensioner’s Benefit Accounts and Prize Bonds have recorded positive netreceipts. Massive withdrawals of funds from some aforesaid savings schemes during the current fiscal year is mainly

due to ban on institutional investment and better investment opportunities elsewhere, particularly in the stock marketand real estate business.

Keeping in view the increasing trend of interest rates in the financial market the Government of Pakistan has raisedthe nominal rates of returns on most of the schemes during the current fiscal year. In the case of Defence SavingCertificates the rate has been increased from 8.15 percent last year to 9.46 percent this year. Nominal rate on specialsaving certificates has been increased from 6.95 percent last year to 8.60 percent this year, nominal rate on savingaccounts from 4.0 percent to 5.0 percent and nominal rates on Bahbood Saving Certificates and Pensioners BenefitAccounts from 10.08 percent to 11.04 percent. As a result of these increase, real deposit rates became positive for all the schemes except saving accounts and Prize Bonds (Table-7.10). During 2004-05 weighted average real



Capital Markets

113

deposit rate was negative (-2.01%) while in the current fiscal year it became positive (0.39%).

Table-7.10 : Nominal and Real Deposit Rates on Savings Schemes During 2002-2006

2002-03 2003-04 2004-05 2005-06

Scheme (Maturit y) NominalRate(p.a.)

RealRate

NominalRate (p.a.)

RealRate

NominalRate(p.a.)

RealRate

NominalRate (p.a.)

RealRate

1. Defence SavingCertificates(10 Years)

2. Special SavingsCertificate, Registered(3 Years)

3. Regular IncomeCertificates (5 Years)

4. Mahana AmdaniAccounts (7 Years)

5. Saving Accounts(Running Accounts)

6. Pensioners’ BenefitAccounts (10 Years)

7. Bahbood SavingCertificates

8. Prize Bonds (RunningAccount)

10.03

8.67

9.12

10.41

5.00

11.04

-

6.00

6.93

5.70

6.02

7.31

1.90

7.94

-

2.90

7.96

7.27

6.96

10.41

4.00

10.08

10.08

5.0

3.36

2.67

2.36

5.81

-0.6

5.48

5.48

0.4

8.15

6.95

6.84

10.41

4.00

10.08

10.08

5.00

-1.15

-2.35

-2.46

1.11

-5.3

0.78

0.78

-4.30

9.46

8.40

8.88

10.41

5.00

11.04

11.04

5.00

1.16

0.10

0.58

2.11

-3.30

2.74

2.74

-3.30

Weighted Average 8.8 5.7 7.2 2.6 7.29 -2.01 8.69 0.39Source: Directorate of National Savings, Finance Division.

Average inflation was 3.1% during 2002-03; 4.6% during 2003-04; 9.3% during 2004-05 and 8.3% during July-March 2005-06.

Two newly launched schemes namely Pensioners’ Benefit Accounts and Bahbood Saving Certificates remained verypopular with their combined net accruals of Rs 64.1 billion during July-March 2005-06 as compared to their netaccrual of Rs 64.9 billion in the same period last year. The Pensioners’ Benefit Account has been launchedexclusively for retired government/semi government employees, whereas, the Bahbood Savings Certificates havebeen launched for widows and senior citizens (above the age of 60 years). Moreover, keeping in view the hardshipfaced by pensioners, senior citizens and widows; the Federal Government has allowed exemption from the deductionof withholding tax on both the schemes with effect from 1st July 2004. In order to provide small savers, an access tothe stock market, the Government plans to give maximum administrative and operational autonomy to the CDNSenabling it to launch mutual funds on more professional lines. The accounts of the Directorate are beingcomputerized and National Savings Centres are being shifted to better and specious places. The aforesaid measureswill help to further improve the customer services.

National Savings has launched its software development project, the project of uplifting and upgrading the facilities at theoffices of the National Savings, data entry project, and the establishment of main IT center and installation of hardware atpilot sites. The processing and selection of all the firms for four projects have already been made by the CDNS.




114

Annexure-1

1) Capital Market Developments/Formulation of Securities Laws, Rules and Regulations.

(i) Continuous Funding System (CFS):In order to alleviate the problems associated with COT/badla financing, on 22 August 2005 COT was replaced withthe continuous financing system (CFS). CFS is an interim measure to enhance the level of liquidity in the market andto facilitate alternative modes of leverage financing such as margin financing and futures and options to develop.

The Commission in consultation with the stock exchanges agreed to extend the time by half an hour for theContinuous Funding System (CFS) release session, and one hour for CFS funding after closure of the normal tradingsession, for the availability of CFS financing after close of the ready market, and to facilitate the market participants.

SECP and the Karachi Stock Exchange are working towards separation of CFS and ready markets for riskmanagement purposes. Currently, netting between CFS and ready markets results in reduced (or nil) exposure of abroker, which results in reduced (or nil) margin deposit with the exchange thereby exposing the exchange to greater

risk.

CDC has developed a functionality in the Central Depository System not only to segregate the book-entry securitiesheld against CFS transactions but also to provide the segregated reports and national clearing company of PakistanLimited (NCCPL) has developed a daily Surveillance Report of CFS Financier for monitoring compliance by the stockexchange.

(ii) Amendments in Proprietary Trading Regulations:

For the protection of investors and curbing market abuse, the proprietary trading regulations were amended on 7thOctober 2005 to disallow brokers from aggregating orders of clients. The amount of penalty for violation of theregulation was also increased from Rs 25,000/- Rs 100,000/- respectively.

(iii) Amendments in Listing Regulations of the Stock Exchanges:

In order to bring the Listing regulations of the stock exchanges in line with the Code of Corporate Governance, theCommission on 14 November 2005 made amendments in the listing regulations. Further, to protect the interest of thegeneral public, allocation of shares to sponsors in excess of 25 percent and allocation of shares under Pre-IPOplacement including employees of the companies/ group companies etc., shall not be saleable for a period of sixmonths from the date of public subscription.

(iv) Trading via account of other brokers bared:

For the purpose of investor protection, market transparency and promoting fair and efficient market practices thecommission issued a directive to exchanges on 23 September 2005 prohibiting brokers to trade through other brokerage houses within the same exchange w.e.f. 10 October 2005.

The SECP is currently in the process of finalizing a code of conduct for financial analysts, which seeks to addresspertinent areas and establish guidelines for preparing investment research reports and recommendations byanalysts.

(v) Standardization of Futures Contracts with Multiple Durations:

The Commission on 17 October 2005 approved standardized futures contract specifications for thirty, sixty and ninetyday’s futures contract on cash settlement. The standardized futures contract inter-alia includes the contract code,size, contract period, position limits and settlement terms. The Regulations Governing Futures Contract for 30, 60,and 90 days are currently being amended by KSE, in light of the daily settlement definition/methodology, initial



Capital Markets

115

deposit, eligibility criteria for selection of scrips and the replacement of deliverables futures contracts with cashsettled contracts.

2) Risk Management Governance and Transparency Measures

In order to strengthen market integrity and minimize systemic risk, the Commission introduced the following riskmanagement measures during the period under review;

Pre-Trade Margin Verification system: KSE was directed to implement pre-trade margin verification to ensure thatbrokers do not exceed the capital adequacy and deposit requirements and to pre-empt any such move on part of abrokers. KSE implemented pre-trade margin verification systems in the ready market on September 12th 2005 and inthe futures market on October 18th 2005.

Exit Mechanism: It had been observed that such situations had emerged in the past when investors were unable toexit the market, due to a lock-in effect of the circuit breakers. Many investors have shown their concern on the non-availability of exit opportunities in the event that share prices remain at the circuit breakers levels. The Commissionstrongly felt that there was a need for providing exit options to the investors. In this regard, the Commission on 6th December 2005 approved an Exit Mechanism as proposed by KSE for immediate implementation.

Regulations for Good Governance: The Commission made regulations for the stock exchanges to provide for theelection of the Chairman of the Board of Directors of the stock exchanges from amongst the non-member directors of the Board, to strengthen governance, enhance transparency, and reduce conflict of interest on the Board.

Disclosure in Futures Market: SECP has been taking steps to make the futures market more transparent andenable more adequate disclosures of information for the benefit of investors. After looking at various practices fromvarious jurisdictions, the exchanges were directed to disseminate through the exchange website, names of the topmembers in terms of open interest in futures without indicating whether the open interest is that of sale or purchase.

3) Work-in-Progress

Unique Identification Number (UIN): In order to provide for a fair and efficient market and protect the interest of investors, a UIN system is being developed by central depository company. UNI system will create a traceable linkbetween the orders executed through different brokers through the unique identification of the person and distinguishproprietary trades from customers’ trades. The system is expected to be implemented by 15th June 2006.

Free Float Index: In order to ensure that the KSE-100 Index represents a fair picture of the market, the KSE hasbeen advised to review/examine international best practices with respect to the construction of market indices basedon parameters such as free float rather than the number of outstanding shares. The Commission in October 2005granted approval to the KSE concept paper for the KSE-30 Sensitive Index. The companies on the index would bethe top companies ranked on the basis of liquidity, market capitalization and a minimum free float of 10 percent. Thesystem shall be ready for implementation by May 1, 2006 and integration and is keeping a close liaison with the stockexchanges and other stakeholders to drive the process.

Demutualization of stock exchanges: The SECP set up a committee of local and international experts ondemutualization of stock exchanges in the country. The committee submitted its report to the SECP on 2nd September 2004. The committee recommended demutualization and integration of existing exchanges throughspecial legislation. Alternatively, the committee recommended that a new stock exchange sponsored bybanks/financial institutions should become a National Exchange whether or not the existing stock exchanges mergeinto it. SECP is vigorously pursuing the process of demutualization.

New Futures Trading Act: The Commission, through the assistance of external consultants under AsianDevelopment Bank’s Technical Assistance, embarked upon the process of drafting comprehensive futures




116

legislation. The draft Futures Trading Act has been prepared in order to protect the investors, provide sounddevelopment of the futures market and ensure that the trading is carried out in a fair and smooth manner. The finaldraft of the Futures Trading Act incorporates various revisions, amendments or additions as a result of theCommission’s ongoing review and based on the feedback received from various stakeholders including legal

practitioners.

New Securit ies Act: The SECP is working on the Draft Securities Act, 2005 intended to replace the Securities andExchange Ordinance, 1969. Currently, the SECP is in the process of reviewing/incorporating the comments receivedfrom various stakeholders including Karachi Stock Exchange, Lahore Stock Exchange and Islamabad StockExchange in order to finalize the draft for onward submission to the Ministry of Finance for requisite approval.



TABL E 6.1

(Indices)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2005 2006

1 Cotton and Other Textiles 84.44 74.39 72.80 93.62 89.31 113.45 163.80 257.33 252.20 300.07 252.75

2 Pharmaceuticals & Chemicals 252.20 208.94 189.68 213.23 203.68 129.59 207.31 340.55 283.60 323.36 415.03

3 Engineering 107.52 101.99 94.70 116.99 113.34 130.31 248.91 430.35 573.60 629.47 811.42

4 Auto & Allied 104.95 101.40 100.00 128.25 123.63 140.52 362.53 572.48 570.20 708.60 885.13

5 Cables and Electric Goods 142.12 126.13 112.13 123.42 116.96 118.22 209.60 374.15 319.90 343.85 507.35

6 Sugar and Allied 80.27 69.13 70.79 69.50 84.45 103.62 181.84 374.53 336.10 370.33 489.79

7 Paper and Board 125.13 108.80 92.77 125.40 114.27 126.99 229.46 280.41 276.70 305.77 313.45

8 Cement 144.71 67.27 68.41 106.22 87.17 110.05 217.65 434.20 393.70 406.72 895.35

9 Fuel and Energy 266.27 146.37 156.01 217.55 190.75 100.23 194.84 233.55 341.50 387.59 445.89

10 Transport and

Communications 82.40 53.46 72.59 68.59 53.04 94.17 200.00 348.61 520.40 501.74 631.24

11 Banks and Other

Financial Institutions 104.97 78.10 76.60 84.51 77.56 102.72 217.30 346.86 321.50 329.85 494.99

12 Miscellaneous Sectors 209.58 190.31 191.66 217.88 243.08 122.19 223.20 331.10 349.80 354.48 389.80

General Index of Share Prices 143.02 99.47 105.25 128.83 118.72 106.74 * 204.10 312.70 362.80 371.66 510.06

Change (%) (16.00) (30.50) 5.81 22.40 (7.85) 6.74 * 91.20 53.20 16.00 18.86 40.59

Source: State Bank of PakistanFigures in the parentheses represent negative sign.

* Base of share index h as been changed fro m 1990-91 to 2000-01 - and as per old base (90-91) the general index of sh are

price has increased by 6.74% during 2001-02.

TABL E 6.2

(Rs billion)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2005 2006

1 Cotton and Other Textiles 35.28 25.13 27.43 43.78 38.40 41.09 65.68 88.78 103.09 117.61 113.61

2 Pharmaceuticals 75.57 47.33 48.06 56.05 47.97 50.75 108.20 158.74 171.73 183.05 272.623 Engineering 1.58 1.48 1.34 1.53 1.52 2.06 4.30 6.75 9.29 10.61 13.02

4 Auto & Allied 7.59 6.23 6.52 8.02 7.93 10.19 30.55 38.72 40.68 43.85 67.63

5 Cables and Electric Goods 2.68 2.02 1.61 2.10 2.12 2.36 4.45 7.20 9.05 8.64 17.71

6 Sugar and Allied 4.77 4.19 4.13 3.83 4.53 4.52 7.22 11.08 12.63 14.23 18.73

7 Paper and Board 3.45 2.50 2.82 3.94 4.54 6.54 12.00 16.42 16.80 14.29 21.68

8 Cement 14.45 6.51 6.11 10.21 10.21 15.76 33.54 65.11 68.58 70.40 167.96

9 Fuel and Energy 116.62 46.52 51.96 87.45 79.68 104.48 191.54 485.75 900.63 1004.88 1287.89

10 Transport and Communications 140.47 64.00 80.27 106.17 70.77 70.09 123.29 193.62 291.39 298.57 318.70

11 Banks and Other

Financial Institutions 41.68 28.67 29.26 36.10 38.38 55.01 99.67 187.11 301.64 279.93 770.26

12 Miscellaneous Sectors 24.99 24.74 26.70 32.69 33.20 44.79 65.99 98.20 111.14 104.71 148.73

Aggregate Market

Capitalization 469.15 259.28 286.22 391.86 339.25 407.64 746.43 1357.48 2036.65 2150.77 7218.53

Change (%) 28.40 (44.73) 10.39 36.91 (13.42) 20.16 83.10 81.86 50.03 88.14 58.03

- Figure in the parentheses represent negative signs Source: State Bank of Pakistan

End March

End March

MARKET CAPITALIZATION OF ORDINARY SHARES

SECTORAL INDICES OF SHARE PRICES (1990-91 = 100)



TABLE 6.3

1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05July-March

2005-06

KARACHI STOCK EXCHANGE

i) Total Listed Companies - - 773 765 762 747 712 702 668 659 663ii) New Companies Listed 38 14 2 - 1 4 4 2 16 15 27

iii) Fund Mobilized

(Rs billion) 20.77 15.5 2.2 1.6 0.4 3.6 15.2 23.8 4.2 54.0 58.2

iv) Total Turnover of Shares

(In billion) 5.20 8.1 15.0 25.5 48.1 29.2 29.1 53.1 97.0 88.3 64.3

LAHORE STOCK EXCHANGE

i) Total Listed Companies - - - - - 614 581 561 647 524 524

ii) New Companies Listed 24 10 2 * 1 2 3 3 2 18 5 6

ii) Fund Mobilized

(Rs billion) 19.67 0.7 0.3 - 0.4 2.5 14.2 4.1 3.1 42.1 37.2


(In billion) 2.6 2.8 5.6 9.8 1.6 7.8 18.3 28.2 19.9 17.5 11.9ISLAMABAD STOCK EXCHANGE

i) Total Listed Companies - - - - - 281 267 260 251 232 239

ii) New Companies Listed 28 12 2*

1 0 5 3 1 8 5 5ii) Fund Mobilized

(Rs billion) 11.95 3.3 11.3 5.0 0 0.8 3.7 11.5 2.6 27.6 1.2


(In billion) 0.2 0.1 0.5 3.3 3.1 1.4 2.7 2.1 1.4 0.7 0.2

* Technical listing Source: SECP, KSE, LSE, ISE.

- Nil

NUMBER OF LISTED COMPANIES, FUND MOBILISED AND TOTAL TURNOVER OF SHARES IN

VARIOUS STOCK EXCHANGES



TABLE 6.4

(Rs. Million)

Name of Scheme 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05July-March

2005-06

1 Defence Savings Certif icates 31,405.3 32,271.9 38,349.8 41,212.3 16,580.3 22,037.3 21,990.5 3,238.3 (8,759.1) (4,908.6)

2 National Deposit Scheme (932.3) (115.8) (52.4) (17.2) (21.5) (6.3) (5.7) (6.8) (1.3) (2.2)

3 Khaas Deposit Scheme (219.8) (48.0) (20.5) (52.9) (51.1) (12.1) (13.5) (23.4) (5.4) 14.2

4 Premium Savings Scheme - - - - - - - - - -

5 Special Savings Certificates (R) 14,902.5 20,194.7 24,956.7 19,395.8 9,431.1 36,443.2 84,899.1 (13,199.3) (83,311.9) (42,710.5)

6 Special Savings Certificates (B) (1,266.5) (1,670.7) (883.0) (507.3) 196.3 (203.3) (11.1) (2.6) (4.6) (0.3)

7 Regular Income Certi ficates 16,472.1 54,408.6 59,099.4 26,111.6 8,643.2 11,046.3 (14,923.9) (49,090.5) (40,663.0) (11,298.1)

8 Pensioners' Benefit Account - - - - - - 10,170.0 13,209.3 17,737.2 13,997.4

9 Savings Accounts (5,588.9) (6,699.7) 2,296.6 (196.7) (2,105.0) (329.8) 1,638.1 (729.6) (2,891.4) (4,855.3)

10 Special Savings Accounts 3,849.9 2,607.1 5,879.9 5,450.9 3,626.5 4,266.9 5,135.0 2,894.1 (1,904.8) (1,098.1)

11 Bahbood Saving Certificates - - - - - - - 22,691.0 60,654.6 50,121.9

12 Mahana Amdani Accounts 149.6 48.1 16.5 13.8 52.8 92.8 129.5 120.9 85.9 11.6

13 Prize Bonds 9,546.6 10,510.9 10,125.7 (32.3) 10,390.6 11,588.0 26,840.1 22,841.9 9,357.0 3,315.6

14 Postal Life Insurance 1,464.0 2,138.9 2,548.1 4,131.0 4,377.4 6,448.3 7,367.7 8,668.7 10,335.2 6,052.7

Grand Total 69,782.4 113,647.4 142,241.2 95,508.9 51,120.5 91,371.3 143,215.8 10,612.0 (39,371.6) 6,840.3

Source : Directorate of NSS

Table 6.5

(Rs. Billion)

Name of Institutions 2001-02 2002-03 2003-04 2004-05July-Dec.

2005-06

1. DFIs 2.9 8.7 13.1 24.7 10.6

2. Special Banks 11.3 25.2 38.8 47.0 23.13. Islamic Banks 2.5 11.1 17.9 43.4 24.4

4. Khushadi Bank 0.2 1.6 1.3 2.3 1.4

5. Micro Credit Bank 0.0 0.1 0.3 0.5 0.4

6. Leasing Companies 15.9 16.0 18.6 16.5 * 12.6

7. Investment Banks 4.4 7.6 7.5 7.4 * 4.4

8. Modarabas 4.8 6.1 6.5 7.3 * 4.9

9. Housing Finance 0.1 0.8 2.4 0.3 * 0.2

10. Discount Houses 0.1 0.2 2.7 2.6 * 0.3

* July-March 2004-05 Source: SBP & SECP.

NATIONAL SAVING SCHEMES (NET INVESTMENT)

LOANS DISBURSED BY DFIs AND OTHER FINANCIAL INSTITUTIONS



TABLE 6.6

S.No. Schemes Markup/Profit Rate Maturity Period Tax Status

1. Foreign Exchange Bearer Certificate (FEBC)a. If Certificate of Rs 1000 encashed before 1 year investor will get Rs 1000 (face value)

b. If Certificate of Rs 1000 encashed after 1 year investor will get Rs 1145

c. If Certificate of Rs 1000 encashed after 2 year investor will get Rs 1310

d. If Certificate of Rs 1000 encashed after 3 year investor will get Rs 1520

e. If Certificate of Rs 1000 encashed after 4 year investor will get Rs 1740

f. If Certificate of Rs 1000 encashed after 5 year investor will get Rs 1990

g. If Certificate of Rs 1000 encashed after 6 year investor will get Rs 2310

2. Foreign Currency Bearer Certificate Scheme has already been discontinued w.e.f. February 1999. Only

(FCBC), 5 years repayment is made

3. Special US$ Bonds

a) 3 year maturity LIBOR+1.00%

b) 5 year maturity LIBOR+1.50%

c) 7 year maturity LIBOR+2.00%

4. Pakistan Investment Bonds: As on 30th June 2001

Tenor Rate of Profit

3-Year Maturity 6.0% p.a





5. Unfunded Debt

Defence Saving Certificates 9.46% p.a (m) 10 Years Taxable for deposits exceeding Rs.150,000

made on or after 01-07-2002

National Deposits Schemes 13.00% p.a. 7 Years Taxable and discontinued

Special Saving Certificates (R) 3 Years Taxable for deposits exceeding Rs.150,000

- For each of 1st five profit 8.40% p.a. made on or after 01-07-2002- For the last one profit 9.60% p.a.

Special Saving Certificates (B) 12.36% p.a.(m) 3 Years Taxable and discontinued

Regular Income Certificates 8.88% p.a 5 Years Taxable

Khas Deposit Scheme 13.42% p.a. 3 Years Taxable and discontinued

Mahana Amdani Accounts 10.41% p.a.(m) 7 Years Taxable on installment exceeding Rs.1000.

Saving Accounts 5.00% p.a. Running Taxable for deposits exceeding Rs.150,000

Bahbood Savings Certificate 11.04% p.a. account made on or after 01-07-2002

Pensioners' Benefit Account 11.04% p.a. 10 Years Taxable for deposits exceeding Rs 150,000

Prize Bonds 5.00% p.a.

p.a.Per annum Source: SBP and Directorate of National Savings

B Bearer

R Registered

m on maturity

The rates are effective form Sept. 1999. If bonds are

encashed before one year no profit will be paid.

MARK UP RATE/PROFIT RATE ON DEBT INSTRUMENTS CURRENTLY AVAILABLE IN THE MARKET

These coupon rates will effective from October, 2003 for

PIBs of 3.5 Χ 10 years maturity while PIBS of 15 and 20

years maturity launched on Jan 20,2004 the respective

coupon rates will effective since then

Sale under this scheme has

already been discontinued, from

December 1999 however, on

outstanding balance till maturity,

rate will be applicable

Documents

07 Captial Market