The badla investment at the Karachi Stock Exchange (KSE) declined by 25 percent while the badla rates dropped by 13 percent last week because of unabated onslaught of bears, eroding share values across the board. The badla investment at KSE fell sharply to a level of Rs 20.4 billion on Friday (May 27), a decline of Rs 6.6 billion versus previous Friday's (May 20) Rs 27 billion. Badla investment fall was due to a combination of declining equity prices and declining badla volumes.
KSE badla volume fell to 234 million shares on Friday from the level of 266 million shares of previous Friday. Equity prices, on the other hand, fell by a scary 11.4 percent during the week. Around Rs 215 billion ($3.6 billion) was wiped off from KSE's market capitalisation in the week alone.
Badla investment at LSE also followed a declining trend and stood at Rs 1.3 billion on Friday. This was a fall of Rs 1.3 billion versus investment of Rs 2.6 billion of previous Friday. However, the fall in badla investment in LSE can also be partially attributed to PSO going spot from Monday.
The weighted average badla rate at KSE fell by 160 bps on weekend-to-weekend basis. The rate last Friday (May 27) stood at 10.8 percent, down from 12.4 percent on the previous Friday (May 20). During the week, on May 26, the KSE badla rate touched a five-and-a-half-month low at 9.9 percent. The decline in badla rate was attributed to declining badla volumes, which denoted lesser demand for badla financing. Added to this was the relatively liquid interbank money market, thus signifying a higher amount of funds available to potential badla financiers.
The weighted average badla rate at LSE stood at 10.2 percent on Friday. This was a decline of 210 bps from previous Friday's level of 12.3 percent.
KSE 100 index saw the largest weekly decline of 833 points (11.4 percent) after March 2005 crisis. Uncertainty about the badla phase out, turnover tax news, letters to brokers by the task force & SECP and the bomb blast in Islamabad further weakened the market sentiment during the week. Institutional buying and PTCL's pre-bid conference failed to lift equity values that ended the week at 19-week low level.
The overall leverage position in the market was declining as depicted by badla and stock futures indicators. Open interest in the derivates market remained at Rs 4.39 billion, whereas ready-future spread was also on the lower side.
At the badla counter, average investment and volume declined across the board in almost all the scrips, as the share values went down like ninepins. Punters squared their positions as badla investments went down by 4.4percent to the extent of Rs 22.4 billion with an average turnover of 241 million shares. Average rate dropped to 10.4percent from 13.4percent reported in the preceding week, as buying interest remain subdued due to downbeat situation of the stock market.
Average badla investment slashed by 14 percent 6.6 billion PTCL, as deceiving reference price hoax is subsiding. Retail investors after loosing a considerable fortune in PTCL are not buying the US $2 reference price story and reacting negatively. Similarly, average badla investment & volume gone down significantly in speculative scrips viz. PSO, POL & DG Khan due to the negative sentiments.
Going forward, analyst from Investcapital Securities believed that some of the badla scrips viz. POL, OGDC, NBP and DG khan are depicting attractive levels.
However, the week is expected to remain under the cloud owing to the 'heartbreaking' news that SECP is asking brokerage houses to furnish details pertaining to their clients transaction in an effort to probe March 2005 Futures crises.
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