Most KSE investors are fixated on their bitter-sweet relationship with equities, or so it seems anyway.
Its been nearly four and a half months since the Bonds Automated Trading System (BATS) was launched at the bourse. But, the response to this new system so far, has at best been lukewarm.
BATS has been unsuccessful, so far, in generating substantial volumes. At a time when global bond markets are bulging, due to investors preference for safer investment opportunities, Pakistani investors seem to care little about new offerings on the KSE.
New products launched into the trading universe must be actively promoted so investors can be enticed to trade. While the launch of the new National Saving Bonds attracted media attention, enough has not been done in terms of road shows, trading manuals etc. to really get the ball rolling in the fixed income domain.
Liquidity has been cited as a key concern in healthy development of the market.
Pakistans current economic condition has found it searching for the last dollar, in absence of which, the government is forced to consume bank credit and elbow out private borrowers. Amidst such signs, Sani Mehmood, a capital markets professional, believes investors do not see business value in national saving bonds at the moment.
Trading in bonds is nothing new for institutional investors in Pakistan, but exchange trading certainly is. But despite the launch of BATS, deals are currently struck quietly in the over the counter (OTC) market.
Ahsan Mehanti, CEO of Shehzad Chamdia Securities, is of the view that the only solution to increasing volumes is to eliminate the OTC market. "Until that happens, bond traders will never be forced to trade on the screen," says Mehanti.
Absence of market makers is another reason for lacklustre performance of BATS so far. Since this is the first effort to develop the secondary market for fixed income trading, market makers, some argue, are necessary to usher in investors.
Zafar Sheikh, DG. National Savings Organization, the man behind the launch of the new NSS paper, however, is of the opinion that interest in the fixed income area is going to take time. Zafar knows from the past experience of launching the KIBOR while at SBP, that innovations in the market take time to set in.
Knowing that two-thirds of Pakistanis are generally cautious in accepting new ideas and changes, according to a survey by Gallup Pakistan, Zafars argument makes sense. But if Gallups survey is to give a clue, then at least one-third of the OTC trading volume should shift on the terminal soon.
Markets and market men are supposed to respond quickly to changes; and, if they don , then why must everyone rebuke the governments bureaucratic machinery for its slackness and let others scot-free.