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Operational challenges dim debut of GIS auction through PSX

Govt picks Rs117.15bn through Sukuk auction via PSX
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December 12, 2022 (MLN): Despite an impressive response to the auction for the 1-year GoP Ijara Sukuk (GIS) through the Pakistan Stock Exchange Limited (PSX), where bids reached an impressive Rs478.78 billion, operational challenges hampered brokerage investors.

These challenges brought to light certain inefficiencies in the PSX Auction System, as witnessed by the majority of brokers.

While talking to Mettis Global News on the matter, Dr. Ali Akhtar, Executive Director at Next Capital Limited, underscored the issue of short deadlines in the overall auction process.

The local bourse released the auction calendar on December 07, surprising many as there were expectations for an extension until the end of December, but the calendar revealed that the auction would take place the very next day after the release of the auction calendar.

“Registering on the new system and simultaneously managing the bid-gathering process became hectic due to the short submission deadline, set for 2:00 pm on the auction day,” he further noted.

In response to these issues and upon receiving requests for bid placement, PSX extended the timeline for 'Primary Market Auction Setup' to 05:00 pm.

However, additional issues arose during the settlement date on December 11, 2023, where the payment deadline was set at 12:00 pm.

"Unlike mutual funds and banks, brokers lack institutional funds, and there is a complex formal process for payments and the payment deadline resulted in significant hassle," Dr. Ali Akhtar added.

He further disclosed that approximately 99% of the participation came from institutional investors, with the remaining 1% from individual investors.

Additionally, he mentioned that Next Capital was the most significant participant, both in terms of bid placement, amounting to Rs12.5 billion, and the accepted amount, which stood at Rs1.2bn.

It is important to mention that out of the total bids received, the government accepted Rs36.068bn at a cut-off yield of 19.52%.

The target for the respective auction was to raise a total of Rs30bn through the sale of a 1-year GoP Ijara Sukuk (GIS).

Going forward, two more auctions are scheduled according to the auction calendar, with the first one set for January 23 and the second for February 20, each with an equivalent target of Rs30bn.

Auction Calendar for GOPIS

Auction Date Signing of Subscription Undertaking Settlement Date Target Auction Size – Rounded Off (PKR in billion)
8-Dec-23 11-Dec-23 11-Dec-23 30
23-Jan-24 24-Jan-24 24-Jan-24 30
20-Feb-24 21-Feb-24 21-Feb-24 30

To recall, the Ministry of Finance (MoF) approved some amendments to the rules governing the issuance, registration, trading, and transfer of GDS through the Capital Market Infrastructure Institutions (CMIIs) such as the PSX, National Clearing and Settlement Company of Pakistan (NCCPL), and Central Depository Company of Pakistan (CDC).

Copyright Mettis Link News

Posted on: 2023-12-12T15:08:30+05:00