The badla investment in the Karachi Stock Exchange (KSE) rose to Rs 26.1 billion as prices during the preceding week recorded a significant improvement on back sharp appreciation in share prices of OGDC, PTLC, Sui Northern, Sui Southern, NBP, and MCB.
Last week, KSE-100 index continued its positive journey and gained hefty 210 points. During the week, two key levels of 5200 and 5300 points were broken, on closing basis. The trading pattern of Friday clearly shows that there is strong support in the market at lower levels.
With rising stocks, badla market is also seeing surge in investments and annualised rates. But the good thing is that all the borrowers are getting funding through the official badla system.
On March 29, the KSE board decided that COT (badla) financiers and borrowers would not be required to make contributions to the Clearing House Protection and Investors Protection Funds.
This may have benefited borrowers (small investors). However last week, SECP suspended that decision of the KSE. The SECP view was that it would be unnecessary for the Exchange to take a decision on COT at a time when the SECP is in the process of phasing out COT financing.
Weighted average badla rate reached 12.8 percent on weekend (April 9), a rise of 0.8 percent over the previous weekend (April 2) rate of 12 percent.
During the week, on Monday, badla rates reached 14.8 percent, however, with more liquidity coming in to chase higher returns, the rates ease and reached 12.8 percent at the weekend.
Badla rates in leading stocks on Friday were as follows: PSO 9.95 percent, Pakistan Oilfields 14.24 percent, PTCL 6.37 percent, NBP 12.16 percent and Hubco 11.34 percent.
At LSE, the weighted average badla rate was 19.9 percent last Friday (April 9), indicating an increase of 6.5 percent over 13.4 percent on the previous weekend.
The total badla investment reached Rs 26.2 billion on Friday. This indicates surge of Rs 1.3 billion over the previous weekend. During the week, on Thursday (April 8), total badla investment reached Rs 27.5 billion, which is an all time high level.
The rise in badla investment is a function of rising share prices and mounting leveraged positions.
Badla volume at the KSE is also up 9.1 million shares to reach 488.5 million on Friday. At the LSE, total badla investment was Rs 3.6 billion on Friday (April 9), while on previous Friday it was at Rs 3.2 billion.
Looking at the bullish fever in the local bourses, there is very less chance that badla rates will ease. SECP's announcement regarding COT exposure also failed to result in any correction in the market.
Thus unless there is a correction in the market, rates will remain on the higher side.
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