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| August 1, 2005 | Monday | Jumadi-us-Sani 24, 1426 |
Liquidity supply issue haunts Karachi bourses
THE stocks again fell across a broad front amid declining volumes caused by the pressure on liquidity supply in the absence of a credible financing mode. Investors did not go for badla or margin financing in the hope of a positive outcome of the high-powered meeting held on Friday to sort out the issue.
Falling volumes reflect the tactical moves of brokers to send messages to relevant quarters that the trading cannot get smooth till the daily funding problem was resolved.
Official quarters were silent on findings of the Shaukat Tarim Committee but reports were tilting towards the restoration of badla alongside margin financing for a specific period.
The standoff on the Carry Over Trade (COT or badla), once again dominated the trading throughout last week as investors kept to sidelines, citing liquidity as the chief inhibiting factor.
After fluctuating under the bouts of buying and selling, the KSE 100-share index suffered a fall of 174.92 points at 7178.93 as compared to 7,353.85 a week earlier. All leading base shares fell further.
All eyes remained focused on July 29, meeting to ascertain whether or not the badla facility should continue for few more months along with the margin financing.
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Brokers and officials appeared to be engaged in tactical manoeuvring to outwit each other by deciding who will be the first in resolving the current standoff, they said.
An idea of the market’s sluggishness may well be had from the fact that the trading volume on Monday fell to nine-month lows. A section of leading operators demonstrated in more than one ways that without adequate funds or badla financing facility the current sluggishness will stay.
It, however, was, not the single-session low. Previous September 3,2001 and August 2,2002 lows had hit 15.141 million and 16.893 million shares, respectively due to the technical pause caused after implementation of the T+3 trading system.
In conditions similar to the one prevailing, financial institutions normally step in to fill the money supply gaps here and there. However, they too, had followed the general line of action for unknown reasons, some brokers said.
Despite positive report of the official committee on the revival of badla financing facility, stocks failed in maintaining the early run-up as investors were still in two minds on the official decision.
The market may not be facing the liquidity problem of the magnitude being projected by some quarters, pressure groups seemed to be out to win the battle at any cost, analysts said adding, and badla issue perhaps, had become a prestige point for many.
The opening was steady followed by an active anticipatory buying on the selected counters amid hopes of revival of badla financing but trading lacked aggressiveness associated with a bull market.
The COT financing was essential to meet the liquidity needs of a market and appeared agreeable in the light of proposals submitted by the Committees. A positive verdict by the Islamabad high-ups will reinforce the investor-perception of a robust future rally.
Badla issue had entered into a no-win situation for contenders analysts said and added that either should blink to resolve the issue.
However, it is too early to speculate on the official decision but indications were there that the SECP will opt for the original KSE proposal of running a parallel market, both badla and bank margin financing until the replacement of the decades-old system was considered smooth.
The cap on future positions was expected to remain in place, although its limit could be increased from the current Rs12 billion to Rs20 billion for averting any major default or payment problem among the trading parties.
Minus signs again dominated the list under the lead of Mari Gas, Javed Omer, the IGI Insurance, Ahmed Hassan Textiles, Premier Sugar, Pakisan Petroleum, United Sugar, Millat Tractors and Nestle MilkPak.
The EFU General and the Unilever Pakistan managed to finish with good gains. Other prominent gainers were led by the Clariant Pakistan, Mehmood Textiles, Gatron Industries, the PSO, and Shell Pakistan followed by Javed Omer, Arif Habib Securities and the Siemens Pakistan.
FORWARD COUNTER: Speculative issues on the cleared list also followed the lead of their counterparts to fall further in ready section under the lead of Pakistan Petroleum, off by Rs16.
Other pivotals, notably the PTCL, the OGDC, the PSO, the National Bank and some others also fell, while the Engro Chemical and the Fauji Fertiliser did not toe the general line and managed to finish robust on the strength of higher dividend, and so were some others which rose fractionally.
—Muhammad Aslam
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