The weighted average badla rate on the Karachi Stock Exchange (KSE) was at 8.1 percent, declining from 14.1 percent a week ago, because of massive downward correction and immense liquidity available on the interbank market.
The weighted average badla rate on the KSE stood at 8.1 percent on June 25 as against 14.1 percent on June 18.
This sharp fall in the badla rates can be attributed to a couple of things. First, stock prices remained under pressure forcing reduction in leveraged holdings.
Secondly, there is still ample liquidity in the hands of potential badla financiers, which was further complemented by the highly liquid interbank money market.
This phenomenon of single-digit badla rates even on June 25, whose settlement is on June 30, is a result of the huge amounts of liquidity available coupled with declining weak holdings.
The weighted average badla rate on the Lahore Sock Exchange (LSE) on Friday (June 25) stood at 8.6 percent, which represents a 400 basis points decline from the previous Friday's rate of 12.6 percent.
The badla investment on the KSE fell to Rs 21.8 billion at the weekend (June 25). This represents a decline of Rs 1.4 billion from the previous weekend's (June 18) level of Rs 23.2 billion.
There are a couple of reasons for this decline in badla investment, first, the reduction in equity prices has played its part, secondly, more interestingly, the KSE badla volume has depicted a sharp fall.
When compared on a weekend to weekend basis, KSE badla volume is down by 66 million shares. One reason for this sharp fall in badla volume is the revised COT list.
The replacement of old stocks, especially Fauji Cement and PIA has caused a reduction of around 50-55 million shares at the KSE badla market. Thus, badla investment is also lowered by around Rs 0.8-1.0 billion owing to this list revision.
The badla investment on the LSE stood at Rs 2.4 billion last Friday, which took total badla investment at the weekend to Rs 24.2 billion, a decline of Rs 1.8 billion from the previous weekend.
During the last week, weak holdings declined considerably amid genuine institutional investment in local stocks. Therefore, with ample liquidity available, the June-end factor was pretty much nullified.
The KSE badla rates towards the end of the last two years (ie end of June 2002 and June 2003) had jumped to around 15-16 percent, owing to withdrawal of funds by badla financiers.
Comments
Comments are closed.