KARACHI, June 12: Cotton market on Friday showed firm trend as spinners made fresh covering purchases anticipating a number of incentives for the textile sector in the budget for 2004-05.

Reports of sharp increase in cotton yarn prices followed by increase in active foreign demand was another supporting factor behind the spinners' strong presence on the market, dealers said.

As a result, some of the deals were done around Rs3,200 per maund for fine lots as spinners and mills covered their forward sales of yarn and cloth against orders from the Far Eastern importers, they said. However, the main topic of discussions among the brokers and spinners was the proposed incentives for the textile sector to give further boost to export of value-added products.

"There was a strong rumour that rates of sales tax on lint cotton may be cut or some other mechanism may be announced in the budget to replace the existing duty drawback system", some spinners said.

The textile sector is facing a number of problems with the duty drawback system as huge amounts remained tied to it for months for various reasons having negative impact on exporters liquidity, they said.

The CBR chief in his recent meeting with the textile high-ups has indicated to look into the matter and promised to find some viable solution of the problem. Ginners were, therefore, in no mood to lower their asking prices but rather raised them as spinners and mills tried to cover positions during the pre-budget session.

Further increase in New York cotton futures, which soared 1.58 and 1.30 cents per lb for both the ruling July and the new crop October at 58.17 and 58.60 cents was termed a bullish factor for the local lint, brokers said.

There was, however, no change in the local official spot rates, which were held unchanged despite light ready offtake. Ready business was modest totalling about 6,000 bales, the following being some of the notable deals.

SINDH TYPE: 800 bales, Sanghar at Rs2,900, an exporter sold to a mill and 300 bales at Rs2,500.