Future spreads stagnate at single digit

The leverage position seemed to remain stagnant on weekend-to-weekend basis, with a sharp decline in stock futures spreads, while CFS stood at 18 percent.
The open interest in stock futures at KSE did not budge, when compared on weekend-to-weekend basis. The figure of Rs 15.5 billion for open interest at KSE on Friday (March 24) was the same as the figure seen on previous Friday (March 17). Open interest had gone up during the course of the week and, with spreads shrinking sharply, it seemed that a few investors had taken up short positions. However, with April stocks futures contracts scheduled to begin trading from March 27, open interest declined on the last day of the week by around Rs 1 billion.
The weighted average stock futures spread at KSE stood at 6.1 percent on Friday, which was less than half of the 14.0 percent seen on previous Friday.
The decline in spreads can be attributed jointly to short positions taken up by a few investors in stock futures and the nearing maturity of the March contracts on the coming weekend.
Throughout the week, spreads remained in a single digit, in the range of 4.7 to 6.1 percent. Interestingly, the prices of a few scrips (like NBP, Lucky, MCB) in futures came below their ready market prices, thereby resulting in negative spreads in those scrips.
Investors in the futures market generally start to square their positions in the second or last week of maturity of futures contract. March futures contracts will mature next weekend. And, this usually causes spreads to remain dull.
The weighted average CFS rate at KSE once again went limit-up to 18.0 percent on Friday (March 24). This represented a slight increase of 20 basis points from previous Friday''s (March 17) weighted average spread of 17.8 percent. The weighted average CFS rate remained on the higher side throughout the week, with the last two trading sessions characterised by maximum possible CFS rates.
CFS investment at KSE remained stuck at its upper limit as well. Rs 24.6 billion worth of leveraged positions were financed through KSE CFS on the last day of the week, as compared to Rs 24.5 billion on the last day of the previous week. CFS investment at LSE also remained at its upper limit of Rs 2.3 billion.
The upcoming week is the rollover week (from March to April futures contracts) and a large portion of outstanding positions of Rs 15.5 billion on Friday need to be rolled over from March to April contract.