KARACHI, Sept 21: The weighted average ‘badla’ rates at the Karachi carryover trade (COT) market dipped to 8.6 per cent on Friday — reflecting the lowest level in 28 trading sessions — owing mainly to excess liquidity.
Khalid Iqbal Siddiqui, analyst at Invest Capital Securities said that the week witnessed the same abnormal disappearance of spreads between the inter-bank money market overnight repo rates and badla rates at the Karachi COT market. Weighted average badla rates at the Karachi Stock Exchange badla market once again declined to below 9 per cent, and with the SBP sucking a fair amount of liquidity away from the money market, overnight repo rates once again returned to between 8.5-8.9 per cent. At Lahore too, analysts stated, badla market remained dull all throughout the week and even badla rates there succumbed to below 11 per cent.
With the absence of good trading volumes, and a dull range-bound week (except for rumours of PTCL’s board meeting), the afternoon COT sessions remained a bit on the dull side, analysts observed, adding that the badla investment at KSE and LSE (released and unreleased) closed at Rs5.6 billion on Friday, compared to Rs5.8 billion on the previous Friday. With Hubco relegated to spot trading on Tuesday, unreleased badla investment (almost all of which is in Hubco and Adamjee) remained on the higher side at around 20 per cent of total badla financing at KSE.
Analyst said that the depression in badla rates could be attributed to excess liquidity in the hands of badla financiers, who were faced with absence of high-yielding investment avenues.
Analyst stated that since badla market was at the heart of major crises at KSE on numerous occasions, KSE was reported to have decided to change around a few of the badla market ground rules.
According to reports, modifications were made in the settlement time horizon for carryover transactions from T+3 system to 10 days. The idea being to stop withdrawal of funds in crisis-like situations. Even though the approval of such ideas had been floated in the press, analyst said, there was no official communication from the KSE in that regard. Also, the date for implementing the new COT rules remained a mystery.