August 30, 2002	Friday	Jamadi-us-Saani 20, 1423

KARACHI, Aug 29: Around 25 issues of Term Finance Certificates (TFCs) worth Rs15.74 billion were floated in the capital market during last two fiscal years and more are expected in the current financial year, according to latest data of Karachi Stock Exchange (KSE).

Total 39 issues of TFCs worth Rs22.09 billion have been floated since 1995 that captures 5 per cent of the market capitalization.

The leasing sector leads in issuance of TFCs with 28.4 per cent share, fuel & energy 21.5 per cent, chemical & pharma 17.4 per cent, banks & investment companies 8.6 per cent, synthetic & rayon 8.2 per cent, and textile 5.2 per cent.

“Falling interest rates forced the investors to review their fixed income securities portfolio and diversify investment to TFCs,” said a research report of IP Securities Ltd.

The discount rates of State Bank of Pakistan (SBP) have dropped from 20 per cent in October 1996 to 9 per cent in January 2002.

Since the floating of the first ever-corporate bond issue in the form of TFC by Packages Ltd in February 1995, the bond market remained fairly placed up to fiscal 1999-2000.

The numbers of issues were limited due to the high interest paid on government securities, which put the TFC issuers at a comparative disadvantage in raising finance through this instrument. High cost was another of the factors hampering the growth of TFCs in the beginning. But currently the maximum possible expenses related to an issue was approximately 0.2 per cent of the size of the issue.

The IP Securities said that this became possible due to the increased interest by the government towards building up the debt market of the country which promoted it to take steps in this direction. It worked on bringing an easing trend in the interest rates of the country, while simultaneously reducing the rates on national securities on a continual basis.—APP