news letterifmp.org.pk/downloads/newsletter-august-2018.pdf · stitutions, corporates,...

BUSINESS AND ECONOMIC NEWSFLASH

URDU GLOSSARY

MARKETS IN REVIEW

QUOTES AND JOKES

TERMS OF THE MONTH

VOLUNTARY PENSION SCHEMES IN PAKISTAN

NEWSLETTER AUGUST 2018

Institute of Financial Markets of Pakistan

The name of the institute has been changed

from Institute of Capital Markets to

Institute of Financial Markets of Pakistan

Contact Us

Address: Building 9-A, 2nd Floor,

P.E.C.H.S Block No. 6, Shahrah-e-Faisal,

Karachi. Tel: +92 (21) 34540843-44

MESSAGE FROM THE CEO

INTRODUCTION TO THE INSTITUTE

IFMP ACTIVITIES

TERMS OF THE MONTH

BUSINESS AND ECONOMIC NEWSFLASH

URDU GLOSSARY

QUOTES AND JOKES

MARKETS IN REVIEW

ARTICLE ON

CURRENCY FUTURES

00 CONTENT

Message from the CEO

Introduction to the

Institute

IFMP

Activities

Article:

ESSENTIALS OF FIXED

INCOME SECURITIES

AND MARKETS

Urdu Glossary

Quotes and Jokes

Business and Economic

Newsflash

Page: 3 Page: 4

Page: 7 Page: 11

Page: 15 Page: 16

www.ifmp.org.pk 92 (21) 34540843-44 [email protected]

Terms of the Month

Page: 10

Page: 5

Markets in Review

Page: 17

01

Message from the Chief Executive Officer

◊ August 2018 IFMP Newsletter ◊

he last few years have seen a rapid growth in size, quality and

sophistication of financial markets, because of changes in the

policy and regulatory environment, the entrepreneurial initiatives

of individuals and institutions, and the availability of trained man-

power. The continuing growth of financial markets is further adding

to the demand for well-trained professionals.

Institute of Financial Markets of Pakistan is dedicated to the profes-

sional development of financial markets and research on financial markets as well as the

well being of financial markets by educating the professionals about the norms and ethics

being practiced in the markets. IFMP has had a pioneering role in meeting the demand for

educated manpower. It is Pakistan's first specialized institution devoted to the education

and updating of knowledge of manpower for financial markets. It will provide high-

quality educational standards for all types of financial market participants; investors,

brokers, mutual funds, investment banks and policy makers.

The Institute's main activities are (1) Licensing the professionals working in the financial

markets by certifications. The institute’s key responsibility is to educate the professionals

working in different financial markets of Pakistan through examining their knowledge in

their relevant field of work; (2) Studying the latest developments in the financial markets

in order to discover whether there is such a thing as an ideal market economy; and (3)

Contributing to the development of financial markets in Pakistan. By means of these three

activities the Institute seeks to communicate its ideas to the audience both at home and

overseas. The Institute's research is intended, first and foremost, to be neutral, profes-

sional and practical. Rooted in practice, it aims to contribute to the healthy development

of Pakistani financial markets as well as to related policies by conducting neutral and pro-

fessional studies of how these markets and the financial system are regulated and orga-

nized and how they perform.

The economy is changing all the time. The Institute hopes that, by responding to these

changes positively, it can contribute to the dynamic development of the country's finan-

cial markets as well as of the economy itself.

Mr. Muhammad Ali Khan

T

02

Introduction to the Institute


The Institute of Financial Markets of Pakistan (IFMP), Pakistan’s first

securities market institute, has been established as a permanent platform to de-velop quality human capital, meet the emerging professional knowledge needs of

financial markets and create standards among market professionals. The Insti-tute has been envisioned to conduct various licensing examinations leading to

certifications for different segments of the financial markets. IFMP develops a pool of trained and certified professionals, skilled not only to deal in convention-

al instruments but also to trade in new and complex financial market products.

◊ FEE STRUCTURE ◊

Candidate Registration Fee Rs.10,000

Examination Registration Fee Rs.7,000

Membership Fee (Annual) Rs.5,000

Study Guide (Hard Copy) Rs.800

◊ EXAMINATION SCHEDULE ◊

Sun, September 30, 2018

Sun, November 25, 2018

Sun, January 27, 2019

Sun, March 31, 2019

PROGRAMMES

LICENSING CERTIFICATIONS INSURANCE CERTIFICATIONS SPECIALIZED CERTIFICATIONS

Fundamentals of Capital Markets Certification

Pakistan’s Market Regulations Certification

Stock Brokers Certification

Mutual Funds Distributors Certification

Commodity Brokers Certification

Financial Analysts Certification

Mutual Funds Basic Certification

Securities and Futures Advisors’ Certification

Programme (Basic and Core Modules)

General Takaful Agents

Certification

Family Takaful Agents

Certification

Life Insurance Agents

Certification

Non-Life Insurance Agents

Certification

Bancassurance Certification

Bancatakaful Certification

Financial Derivative Traders Certification

Compliance Officers Certification

Clearing and Settlement Operations

Certification

Risk Management Certification

Capital Budgeting and Corporate Finance

Certification

Investment Banking and Analysis Certification

Islamic Finance Certification

Fixed Income Certification


IFMP Activities 03

IFMP announced ‘Diploma in Capital Markets’ with IBA, Karachi

Estimates indicate that more than one million individuals are engaged in various segments of the securities markets as investors and

working professionals and the demand for skilled and competent professionals is constantly growing every year. The Diploma in Cap-

ital Market prepares the securities markets professionals with good understanding of the capital markets. It offers individuals the

opportunity to gain specialist knowledge of financial markets, fixed income, financial derivatives, bonds and fund management. It

covers all major and alternative asset classes and incorporates market best practice, regulation and risk management.

This diploma is a unique opportunity for career aspirants in the capital markets to obtain in-depth understanding, both theoretical

and practical, from Institute of Financial Markets of Pakistan (IFMP), an institute established by the securities markets regulator i.e.,

Securities and Exchange Commission of Pakistan (SECP). On completion of this diploma, the participants would have developed capa-

bility to sort solutions to meet specific requirements in the capital market.

Time: Fri 6:00pm – 9:00pm

Sat 2:30pm – 5:30pm

Sat 6:00pm – 9:00pm

Venue: CEE@IBA,Karachi

Info: [email protected]

Submission of forms deadline 14th September, 2018

Interviews & Admission offers 15th September, 2018 – 21st September, 2018

Fee and Document Submission 21st September, 2018

Orientation Ceremony 28th September, 2018 28th September, 2018

◊ August 2018 IFMP Newsletter Page 5 ◊

IFMP Activities 03

Five-Day Master Class on “TRAIN THE TRAINERS (CAPITAL MARKET AND FIXED INCOME CERTIFI-

CATION COURSE)”, jointly organized by Institute of Financial Markets of Pakistan (IFMP) and Fi-

nancial Market Development (FMD) Project of USAID, in Marriott Karachi.

04


Article

Currency Futures

Fixed Income Currency futures are transferable future contracts that specify the price at which a currency can be

bought or sold at a future date. Every country has a currency which is designated as the legal tender for money

transactions and trade purposes. In Pakistan, the rupee is the legal tender for all kinds of transactions. Howev-

er, there are some countries which use the currency of another nation as their legal tender.

There are different forms of currency such as bronze or silver coins, paper bills, etc. which are used in various

countries. Every currency has been assigned a value which depends upon the economic growth, trade position

and financial condition of the country.

Currency futures are the derivative instruments that help investors to do away with the risk related to ex-

change rate. These instruments derive their value from the underlying exchange rate. As the exchange rate

fluctuates, the currency futures also change in value.

How to invest in Currency Futures?

One can plough money into currency derivatives

by investing in exchange-traded currency deriva-

tives or in OTC currency derivatives like swaps,

forwards, etc. There are various contracts availa-

ble which differ in exchange rates and expiry so it

is recommended to choose them carefully.

Investors who are willing to enter currency futures markets must understand the types of products they offer,

their characteristic features, their risk and return profile and their need to invest in this market.

These contracts provide greater amount of exposure to the underlying asset i.e., exchange rate, by investing in

smaller amount of capital.

Forex markets, being the most volatile markets, have the potential to impact the contract value. Hence, any

fluctuation in the price will have an impact on the portfolio greatly, resulting in huge profits or losses. Busi-

nesses like importers, corporates, exporters, etc. are exposed to currency risk and in order to hedge their cur-

rency risk, they invest in currency futures contracts.

05


Article

Intermediaries in Currency Markets

It is a platform where various intermediaries interact with each other and help in completing the transactions.

It is 24-hour market so it is very important that intermediaries work together to assure smooth processing and

trading. Following are the intermediaries in the market:

Regulatory Authorities

Regulatory authorities supervise the trading activities and regulate the currency marketplace. They issue

guidelines for the market players and also conduct irregular inspection to maintain discipline in the market.

Exchanges

Exchanges provide trading platforms for investors to trade in different financial instruments. These institu-

tions help the traders to place their trades faster as these are well-equipped with modern infrastructure facili-

ties, trading systems, efficient risk management and surveillance systems. Exchanges also ensure the safety of

the investments.

Broking Firms

These firms provide brokerage, consultancy, portfolio management and advisory services for its clients. The

firms charge brokerage fee for the services offered. They have trained personnel who have technical expertise

in handling investor’s funds.

Depository

It is an institution that holds securities of investors in electronic form through a registered depository partici-

pant. It also offers services related to transactions in securities.

Clearing Corporations

These corporations oversee and help in the clearing and settlement of exchange-based transactions. These are

also known as clearing houses. These houses minimize chances of default risk and ensure completion of trades.

06


Article

Currency as an Asset Class

Foreign exchange or currency markets are one of the largest markets as compared to asset class. Financial in-

stitutions, corporates, manufacturers, importers and exporters trade in currencies to support their financial

operations. All of these market players are exposed to currency risk on entering into a trade with a foreign en-

tity and they have been helped by the currency derivatives to hedge their forex risk.

Forex markets are categorized by a huge variety of products and participation by the market players. The huge

participation creates trading relations between the countries which help in the growth of the economy. These

markets have huge number of transactions and round-the-clock trading which make it the most liquid market.

As a result, it is easy for a buyer to find a seller and vice versa. By investing in currencies, investors can benefit

in a number of ways.

Incentives in Currency Markets

Currency futures contracts offer leverage which

gives investors an incentive to invest in these mar-

kets. In this way, the investor gains greater expo-

sure to the underlying asset by investing smaller

amount of capital. The market follows well-

established trend which makes it more favorable

for the investors. Investors have an easy access to

these markets due to the trading process which is

less complicated and more investor friendly.

Lower costs associated with the transactions have made it easier for the investors to trade in these markets.

New currency products have allowed the small investors to participate and benefit unlike few years back when

forex markets were limited to OTC platforms where financial institutions, corporates and banks were the only

major market players.

**********

07

Terms of the Month


Get Yourself Registered!!

Last Date for Registration for 25th November, 2018

Examination

2nd November, 2018

Advocate

An advocate entered in any roll under the provisions

of the Legal Practitioners and Bar Councils Act, 1973

(XXXV of 1973).

-The Companies (Appointment of Legal Advisers) Act,

1974

Body Corporate

It includes a company incorporated outside Pakistan,

but does not include—

(i) A corporation sole; or

(ii) A co-operative society registered under any law

relating to the registration of co-operative societies;

or

(iii) Any other body corporate, not being a company

as defined in this Ordinance, which the Federal Gov-

ernment may, by notification in the official Gazette,

specify in this behalf.

-The Companies Ordinance, 1984

Islamic Financial Services

Financial services as defined in clause (ka) of sub-

section (1) of section 2 of the Securities and Exchange

Commission of Pakistan Act, 1997 (XLII of 1997) that

are certified by a Shariah Advisor as Shariah compli-

ant. -Shariah Advisors Regulations, 2017

Lead Investor

A company which holds at least twenty percent of the

paid up capital of the bond pricing agency and takes

the lead role in the establishment and management of

a bond pricing agency.

-The Bond Pricing Agency Rules, 2017

Mortgage

An interest or lien created on the property or assets

of a company or any of its undertakings or both as se-

curity.

-The Companies Act, 2017

08

Business and Economic Newsflash


Revenue collection jumps 13.6pc

The Federal Board of Revenue (FBR) claimed its collection posted approximately 13.6 per cent growth in the first

two months of the current fiscal year, giving an elbow room to the new government in wake of a huge spending

lined up.

In absolute terms, the provisional revenue collection reached Rs510bn in July-August FY18 as against Rs449bn col-

lected over the corresponding months of last fiscal year.

FBR is expecting a few more billions when the book adjustments and other reconciliation of figures are finalised in

the next couple of weeks.

The government has set the 2018-19 tax collection target at Rs4,435bn for FBR, which is 18.23pc more than Rs3,

751bn sum collected in 2017-18.

Further breakdown showed that the Inland Revenue Services — income tax, sales tax and federal excise duty — col-

lection hit Rs405bn in July-August FY19 as against Rs364bn over the corresponding months of last year, reflecting an

increase of 11.3pc.

The customs collection rose to Rs105bn in the first two months versus Rs85bn over similar period last year, record-

ing a growth of 23.5pc.

A senior tax official said that FBR will have to maintain these robust growth trends in revenue collection in the com-

ing months.

Finance Minister Asad Umar will formally review the performance of the revenue department from the next week.

He has already posted a new chairman at the bureau to kick start reforms within the tax machinery.

The appointment of FBR chairman will be followed by a massive reshuffle within the department to appoint officers

of integrity on key posts. It is also likely to reverse all those exemptions which were announced by the PML-N gov-

ernment at the end of its tenure.

Meanwhile, the FBR has extended last date of filing of income tax returns/statements for the tax year 2018.

According to a circular issued here by the FBR, the date for filing of income tax returns — through e-portal for sala-

ried individuals — has been extended from Aug 31 to Sept 30.

08



Refineries in the crosshairs

A Senate panel on 31st August ordered an end to the decades-old indefinite protection to local ‘inefficient’ refiner-

ies through “deemed duties” in petroleum prices at the cost of public exchequer and the public at large.

The Senate Standing Committee on Petroleum, chaired by Senator Mohsin Aziz of PTI, sought full details of benefits

earned by domestic refineries. On the occasion, two invitees — a former official of Pakistan State Oil (PSO) Tariq Ak-

bar and former member Energy Planning Commission Shahid Sattar — estimated that some Rs500 billion have gone

into refineries’ pockets.

Minister for Petroleum Ghulam Sarwar Khan promised that the new government would seriously examine oil pricing

and correct any wrongdoings for future.

Mr Akbar alleged that the military-led government in 2002 allowed deemed duties on four major petroleum prod-

ucts at 10-13 per cent to domestic refineries for three years — on the pattern of customs duty on imported prod-

ucts — as an incentive to help them develop infrastructure. He said that former prime minister Shaukat Aziz had or-

dered gradual elimination of deemed duties within the next two years in 2006. However, the 7.5pc deemed duty on

high speed diesel was still continuously going to the refineries to date.

Mr Sattar seconded that the deemed duty on petroleum products should have come to an end in 2006 but it has

been going on and on as extensions were repeatedly granted each time for 2 years by the Economic Coordination

Committee (ECC) of the Cabinet over the next 12 years.

Mr Akbar said the refineries should have earned Rs1bn per annum on the basis of their paid up capital during last

decade as they earned Rs37bn a year. He said that the suppliers of oil products through imports were earning

profits with better quality diesel containing 0.5pc sulphur and the government charged customs duty that went to

the government kitty. However, the deemed duty for local products did not reach public exchequer and rather went

to refineries which produced a poor quality product containing 1pc sulphur. “We have been subsidising a bad prod-

uct out of consumers’ pockets and to their disadvantage,” he said.

However, these allegations were contested by Acting Director General Oil Azam Khan who said that deemed duty

was allowed to refineries to keep them afloat otherwise these would have closed down due to losses. He said the

refineries also upgraded through isomerisation and dehydration plants.

08



The committee chairman and other senators believed the protection to even strategic industries should be for a lim-

ited period like 2-3 or 10 years to help them modernise and become profitable. The duty should not be allowed for-

ever to incentivise inefficiency and corruption. Senator Aziz said that it was ironic that Pakistani public was suffering

due to poor quality domestic production in the oil sector as well as the automobile industry that made a killing

through a deletion programme.

According to an ECC decision taken on March 8, 2013, refineries — including National Refinery Limited, Pakistan Re-

finery Limited and ARL — had to deposit their profits above 50pc of the paid-up capital (along with the accumulated

unutilised balance) in a special reserve account. However, instead of shifting the amount in special reserves to an

Escrow account, they spent the entire special reserves on upgrading the refineries, the committee was told.

Secretary petroleum said that problems which were not addressed during the last ten years would be taken up.

There would be improvement in oil and gas exploration activities in Balochistan province during the next six months,

he added.

The petroleum minister said a task force was being set up to address issues in oil and gas exploration activities. He

stressed that the 18th Amendment was not being followed in true spirit.

It was also informed that the committee would review the performance in oil and gas exploration every six months

and information would be provided about the blocks awarded to local and foreign companies in Balochistan.

Senator Mir Kabir said that minerals were being explored in Balochistan but the provincial government was not

getting its due share. The Balochistan government was receiving only 2pc share in Saindak project and amount of

this share was not also being paid, he added.

LNG deal with Qatar

The committee was informed that the National Accountability Bureau (NAB) was probing the Liquefied Natural Gas

(LNG) deal with Qatar. Senator Aziz said that there was nothing in LNG deal with Qatar to keep it secret. “Why was

the deal struck for fifteen years,” he questioned.

The Pakistan State Oil (PSO) officials said that under the deal, the two parties were bound not to disclose the deal

except if demanded by a lawful forum and hence it had been shared with chairman senate and the senate com-

mittee. The PSO officials further said that such agreements of sale and purchase are kept secret on international lev-

el. The committee chairman said that consultants did not recommend a fifteen-year LNG deal with Qatar. The sena-

tors expressed serious concerns over the presence of an official who was sacked from PSO on corruption charges.

The committee recommended sending its observations on LNG deal with Qatar to NAB which was already examining

it thoroughly.

08



Govt cuts diesel, petrol prices

The prime minister on 31st August reduced the prices of three major petroleum products as recommended by the

oil regulator to pass on the benefit of lower international prices to consumers.

On the recommendations of Oil and Gas Regulatory Authority (Ogra), Prime Minister Imran Khan approved changes

in the prices of petroleum products, entailing reduction in prices of three products and increase in another.

As such, the ex-depot price of high-speed diesel (HSD) was cut by Rs6.37 per litre to Rs106.57, down by 5.6pc from

Rs112.94.

Likewise, the ex-depot price of petrol has been set at

Rs92.83 per litre, down by Rs2.41 or 2.5pc. Also, the ex

-depot kerosene price was fixed at Rs83.50 instead of

Rs83.96, down by 46 paisas or 0.55pc.

On the other hand, the ex-depot price of light diesel oil

(LDO) has been increased to Rs75.96 per litre from

Rs75.37, up by 59 paisas or 0.78pc.

In doing so, the PTI government did not change the ex-

isting tax rates on any of these products. The new pric-

es will remain in place throughout September.

Currently, the government is charging 22pc GST on

HSD, 9.5pc on petrol, 6pc on kerosene and 1pc on LDO.

In addition, the government is also charging Rs8 per litre petroleum levy on HSD, Rs10 on petrol and Rs6 and Rs3 on

kerosene and light diesel oil (LDO) respectively. The petrol and HSD are two major products that generate most of

the revenue for the government because of their massive and yet growing consumption in the country.

The HSD sales across the country are now going beyond 800,000 tonnes per month against monthly consumption of

around 700,000 tonnes of petrol. The sales of kerosene and LDO are generally less than 10,000 tonnes per month.

************

09

Urdu Glossary


Bonds تمسکاِت قرض

Deadline مقررہ وقت

Economic Analyst معاشی تجز یہ کار

Financial Instability مالیاتی عدم استحکام

High-Risk Assets زیادہ خطرے واےل اثاث

Joint Venture Subsidiary کہ وینچر یک ذییل کمپن مشتی

Liability Limit محدو دذمہ داری/واجبہ

Methods of Indexing اشاریہ سازی ےک طریقی

Offering Documents پیش کردہ دستاویزات

Partnership Agreement ات معاہدہ شیر

Rebuttal Evidence ترد یدی شہادت

Service Charges معاوضہ خدمت

Terminal Bonus اختتایم بونس

Unpaid Interest غتر اداشدہ سود

10

Quotes and Jokes


11

Markets in Review


◊ Monthly Review ◊

Crude Oil

(WTI)$

Beginning 68.91

Ending 69.89

Change 0.98

KIBOR

(6 Months)

Bid % Offer %

Beginning 7.77 8.02

Ending 7.81 8.06

Change 0.04

Pakistan

Stock

Exchange

100 Index

Beginning 42,712.43

Ending 41,742.24

Change -970.19

Gold

10 Grams

Beginning Rs. 47,540

Ending Rs. 49,125

Change Rs. 1,585

Silver

10 Grams

Beginning Rs. 617.28

Ending Rs. 685.87

Change Rs. 68.59

Foreign Exchange Rates

Interbank Market (buying)

GBP (£) EURO (€) USD ($)

Beginning Rs. 162.62 Rs. 145.24 Rs. 124.00

Ending Rs. 161.67 Rs. 145.29 Rs. 124.30

Change Rs. –0.95 Rs. 0.05 Rs. 0.30

Contact Us

www.ifmp.org.pk 92 (21) 34540843-44 [email protected]