KARACHI, Aug 27: The weighted average rate on the Karachi Stock Exchange under the newly introduced financing mode of Continuous Funding System (CFS) showed a fresh increase of 240 basis points at 18.2 per cent as compared to 15.8 per cent a week earlier.
Analysts at a leading brokerage and research house said the introduction of the CFS, with a cap of Rs25 billion, has given the needed push to demand for more finances for the share business as was reflected by a sharp rise in the daily volume figure to 315m shares from the previous week’s 134m shares.
An idea of surging demand for funds under the CFS may well be had from the fact that over the last week the figure touched the high mark of Rs22.490 billion from Rs16.391 billion on Monday.
“The question being asked is whether or not the market’s financing needs will be met if stock prices rise further in the coming weeks”, analysts said adding “there are fears among the investors that the Rs25 billion limit may be crossed any day in the backdrop of CFS-inspired rally”.
The sharp rise in demand for funds was attributed partly to shifting of positions financed from the old system of badla under the CFS and partly to brisk trading on the KSE and a considerable decline in the leveraged positions.
Meanwhile, the August futures matured on Friday, leaving an open interest of Rs4.4 billion to be settled on Aug 31. The open interest in September future contracts stood at Rs5.4 billion, which showed a fall of Rs2.7 billion as compared to Rs8.1 billion a week earlier.
The weighted average rate for financing to the stock futures was quoted around 10.5 per cent during the last week, according to analysts.
