CFS crosses 18 percent cap

The weighted average CFS rate on the Karachi Stock Exchange (KSE) were at higher side and increased by 315 basis points to 18.8 percent as compared to 15.6 percent of previous Friday.
The reason for higher than 18 percent cap on CFS was that on Friday MCB was on ex-dividend in CFS market. CFS investment was recorded at Rs 25 billion similar to what was seen at the end of previous week.
Badla investment at LSE stood at Rs 0.81 billion as against Rs 0.78 billion recorded on the previous weekend. Badla rate at Lahore, however, has increased by 536 bps, to 25.0 percent.
On the last trading day of the week (November 25), stock futures open interest in the December contracts stood at Rs 10.3 billion. The open interest in November contracts stood at Rs5.3 billion, which will be maturing next week. The last month futures, ie the November contracts', first weekend (October 28) showed an open interest of Rs 5.7 billion, thus denoting a higher open interest to start the contract this time around.
In terms of number of contracts, the open interest for December contracts stood at 216,520, which was also an increase when compared with the first weekend of the November contracts.
The weighted average stock futures spread at KSE rose to 17.0 percent last Friday, when compared with the previous weekend's (November 18) level of 12.5 percent.
The jump in the rate can be attributed to two things - a tight inter-bank money market, and the bullish trend in equity prices - which may have created a higher number of leveraged positions that needed to be financed. Thus, CFS financiers (lenders) had the opportunity to raise their expected return on lending.
There really was not much to say about the CFS investment level at KSE, except for the fact that this is fifth consecutive weekend where it has stood at its upper limit of Rs 25 billion.
During last week, there was plenty said (relative to previous weeks) by the concerned officials on the privatisation front. Some sort of confidence was developed for the speculators, at least for the time being, by these statements. The oil exploration and marketing sectors stock prices have become strongly linked to international crude oil price movements in the absence of any corporate results. It is believed that these two issues will continue to influence the decisions taken by investors in the coming days.