KARACHI, Jan 18: The average badla rates at the Karachi Stock Exchange topped 47 per cent on Friday, while at the Lahore Stock Exchange they sky-rocketed to 77 per cent.

Khalid Iqbal Siddiqui, analyst at InvestCapital said that the badla rates had mounted each day since weak holders refused to part with their investments. On Friday, the weighted average badla rate had jumped to 47.4 per cent against 21.7 per cent on the previous Friday. “This is close to the upper limit of 50 per cent imposed by the KSE on badla rates, otherwise the rates could have been higher”, Siddiqui said. Since there is no cap on the upper limit at LSE, the weighted average badla rate shot up to 77.4 per cent, from 48.5 per cent on the earlier Friday.

InvestCapital believes that the high badla rates denote liquidity constraint on the part of badla financiers. “Another factor that is not related to liquidity and contributing to the tight situation in the badla market is the exposure limits of stock exchange members that restrict them while facilitating lenders and borrowers”, says the analyst.

Rising share prices, were stated to have resulted in rising financing requirements at both bourses. Total badla investment at KSE and LSE combined had reached a level of Rs15.9 billion on Friday, which, analyst said, denoted the increasing level of weak holdings in the stock market.

Iffat Zehra Mankani at IP Securities noted that at the KSE, the badla or COT rates had started at 30 per cent and peaked to 49 per cent on Thursday, before coming down at 47 per cent on Friday, which would average to 39 per cent for the whole week. She says: “Despite superfluous liquidity in the market, the incessant demand for COT funds and the extremely bullish outlook of the investors have made the financiers to be cautious at the high levels of KSE-100”. Analyst said that on Wednesday, record investment for a single day, amounting to Rs13.4 billion was witnessed at the KSE. On an average basis, the COT investment stood at Rs12.4 billion with average volumes of 275 million shares during the week, which was 69 per cent of the average trading volumes of the week.

Hubco stood at the top position in respect of COT investment during the week, replacing PSO which shifted to the second slot.

According to InvestCapital, badla volume in Hubco stood at 67.6 million shares on Friday, with the COT rate at 45.9 per cent; followed by PSO with volume of 10 million shares and rate at 47.9 per cent. Average investment in Hubco, as per IP Securities, was Rs2,884 million and in PSO Rs2,618 million.

Some analysts expect average COT rates to take a “slight dip” in the short term, though not likely to come down to regular levels, but others believe that unless weak holders let go off their investments or financiers and borrowers make alternative arrangements, badla rates could remain at the high level of around 30 per cent next week.