July 14, 2002	Sunday	Jamadi-ul-Awwal 3, 1423

KARACHI, July 13: Average ‘badla’ (Carryover trade — COT) rates in the equity market slipped to 8.6 per cent for the week ended Friday, from the average of 9 per cent the previous week, which some market analysts thought may have put cold water over the hopes of some large players.

“In spite of the shortage of cash in the inter-bank market, the Karachi badla market remained liquid”, commented Mohammed Sohail, head of research at InvestCap. He said that a few investors were expecting badla rates to inch up after the State Bank of Pakistan sucked Rs69 billion from the inter-bank market on July 10 “to teach aggressive bankers a lesson”. However, that did not happen and the COT market rate continued their downward journey.

Analyst said that selling by weak holders, coupled with ample liquidity in the COT market helped rates to ease. With overnight rates at 8.9 per cent in the inter-bank money market for the last two days, overnight rates in the COT market remained far below the 8.9 per cent mark. “Theoretically, this shows market inefficiency but the fact is that the investors in the badla market incur a cost of maturing their investment at KSE”, said the analyst, adding, which was why such presumable inefficiency would essentially remain only in the short run.

Investment in COT market showed a slight fall to Rs3.2 billion, from Rs3.6 billion the earlier Friday; the week’s badla investment included both the released and the unreleased amount. Volume of shares in badla also shrank by 18 million shares to 143 million shares on the weekend. Hubco pulled the overall volume down with around 10 million shares lower in the power plant’s badla volume during the week, as against the previous week. PTCL badla volume also decreased by 6 million shares.

Analysts observed that the reason behind the lower COT investment and volume numbers was the subdued activity in the ready market and a fall of 1 per cent in KSE-100 index during the week.

“However, one should not forget that these COT numbers do not show outside market financing and margin financing from financial institutions”, Sohail said.

InvestCap expects COT rates to further ease in the coming weeks, as the inter-bank money market is expected to receive relief in the form of injection through an Open Market Operation (OMO).

Humaira Zaheer, analyst at brokerage IP Securities commented that for the past nine trading sessions, KSE-100 index had been moving in the 1,780-1,800 zone with a volume of 21.19 million shares on Friday, July 12, which was at its 9-month low. “Any rise in COT rates can only be anticipated on the back of a positive move by the market, breaching the 1,800 level along with an increase in genuine buying, that may result in good, tidy volumes”, Humaira said, adding that IP Securities expected average COT investment to stay put at current levels, unless something positive turns up to push the market forward.