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SECP curb on COT to hurt badla investment

KARACHI (October 27 2003): The Securities and Exchange Commission's (SECP) ruling to restrict carry over transaction to 30 companies from December would impact 20 to 30 percent badla investment on daily basis.

The SECP on Saturday announced that from December 15, 2003, the investors could take badla position only in 30 eligible companies approved by Karachi Stock Exchange in March this year.

According to an analyst, the share of these eligible companies in daily badla investment is around 70 percent while the remaining is concentrated in second- and third-tier stocks.

After analysing last two sessions of the badla investment pattern, the share of second- and third-tier stocks is around 20 to 30 percent.

The share would have been much higher but several investors unloaded their holdings in Pakistan State Oil Ltd following uncertainty over privatisation.

Market players during last couple of months have received a number of potential bidding dates which encouraged them to buy PSO, increasing the share of badla investment in the stocks.

The government has not yet announced the bidding date of PSO, resulting in less badla investment in this scrip.

A leading trader said that lack of interest from genuine buyers, large brokerage houses and institutions had pushed the share of eligible securities to around 70 percent from 80 percent during the hey days of the market when index touched its peak a little over 4600.

He said that the management of Karachi Stock Exchange (KSE) should amend this list and include one or two other stocks, such as Pakistan Oilfields Ltd, which have recently entered the buying chart.

The share of Pakistan Oilfields during the badla investment of Rs 12 billion last Friday was about Rs 950 million.

The move by the SECP hinted that the regulator wants to introduce margin financing from 2004.

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