The launching of the proposed leverage product of Margin Trading System (MTS) will increase the turnover and value of traded shares at the local bourse manifold, analysts said. They said that the absence of ready board leverage facility was the main reason for declining turnover at the local bourse.
"Although the proposed MTS stays on the expensive side, launching of the product will increase the market depth", they added. Analysts believe that estimated traded value would rise up to Rs 12 billion, while turnover would hover in the range of 350 to 400 million, provided complications are not introduced in the product. Then, in case of reduction on pressures on macro stability, index numbers would grow at a rapid pace, they added.
Hasnain Asghar Ali at Aziz Fidahusein Co said that the absence of leverage had reduced the local strength that disallowed locals to trade in the main board stocks above 7 multiples. With economic and social repercussions of the flooding yet to come, caution stays the call, as the estimates would indeed endorse the fact that almost all the main sectors would face the brunt of the flooding at least for next two quarters. A thorough assessment is, therefore, essential before opting for placements even in the stocks having a good dividend stream, while sell stays the call in the high priced stocks, for partial recovery or swap in case of pressure.
He said that technically the adjustment of 1000 points that triggered mainly and only due to resistance in re-launching of leverage product did call for retracement that was duly undertaken due low volume strength in index heavyweights. Absence of triggers will, however, disallow continuity of the bull-run, thereby indicating a revival of bear-run. Positive update on MTS (which is not expected at least for next four sessions) may, however, change the expected move.
It stays a strong conviction, and has already been proved in previous rally that initiated from 9700 and went up to 10500, only on the anticipation of launching of MTS. And the surge was supported by quality turnover ie turnover in main board stocks having capacity of improving multiples upon availability of flexible leverage.
"It is indeed lack of knowledge that compares the launching of various products such as cash settled 7-30-60-90 days with CFS, as time has proved that leverage for ready board has proved as a trigger, that is why its launching stays tough ask, while others were launched over a cup of tea", he said.
The currently available deliverable forward, that is not inviting the desired turnover since its re-launching, have stayed dependent on CFS in past 2005 crisis, for smooth settlement in roll over crisis, thus indicating that launching of MTS will allow substantial rise in turnover in deliverable counter as well.
It won''t be an exaggerated perception or conspiracy theory that some with vested interest are not in favour of launching of leverage product, having universal accessibility and they insist only on approval of "Margin Financing", as such development will allow them to place their ownfunds at higher levels to their clients who will be helpless and other market players, while incase of "MTS" high competition will keep a check on the rate, that has stayed even below KIBOR in CFS regime.