First PSX Sukuk Auction Brings Rs. 479 Billion, Oversubscribed by 16 Times

Investors exceeded expectations on Friday, offering substantial financing of Rs. 479 billion to the government in the auction of one-year Ijarah Sukuk at the Pakistan Stock Exchange (PSX), surpassing the target of Rs. 30 billion by 16 times, according to unofficial results.

This marked the Ministry of Finance’s inaugural auction at the PSX, previously holding such auctions through the State Bank of Pakistan (SBP). The official results from the ministry are yet to be announced.

Shariah-compliant banks had acquired one-year Sukuk at a variable rental rate of “T (T-bills) minus 100 basis points” at the PSX the previous week.

An official from the currency market noted that the Ijarah Sukuk auction at the PSX broke the monopoly of banks in the bond market, redirecting funds from government papers to the private sector for economic activities.

This change aimed to distribute profits more widely, enabling common individuals to invest as low as Rs. 5,000.

A participating banker mentioned that the auction was oversubscribed 13 times at Rs. 369 billion.

Caretaker Prime Minister Anwaarul Haq Kakar inaugurated the Sukuk at the PSX, with Caretaker Finance Minister Dr Shamshad Akhtar also present. In a statement, PSX highlighted the landmark development, hosting the primary market auction of government debt securities (GDS) following rule changes to raise government debt in capital markets.

During the ceremony, Prime Minister Kakar emphasized the collective responsibility to promote primary market auctions, describing it as a remarkable achievement for the entire market ecosystem.

He credited the regained investor confidence to the successful signing of an IMF standby arrangement, the execution of the annual budget 2023-24, and improvements in fiscal and external accounts.

PM Kakar rang the gong, symbolizing progress and prosperity and echoing the commitment to fostering an inclusive and robust financial ecosystem, and attributed the bullish sentiment in the stock exchange to an improved economy, foreign investor participation, high yield, and a stable exchange rate.

Caretaker Finance Minister Akhtar called it a momentous occasion for financial markets and the Pakistani economy, highlighting the steps taken by the Debt Management Office of the Ministry of Finance to enable the primary market auction at the PSX.

PSX MD and CEO Farrukh H Khan explained that amendments in existing rules made the primary market auction of GDS possible at the PSX, breaking the monopoly previously held by the State Bank.

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