KSE seeks brokerage houses data

The Karachi Stock Exchange (KSE) has urged its members to submit trading data of their brokerage houses for the period January to July 2006, by March 9, said a notification issued here on Tuesday.

The KSE made the announcement on the directives of the SECP. The KSE also asked its members to provide details of their clients along with trading data.

In response, the KSE members rejected the notification, saying the KSE held all the day-to-day data that it demanded from them.

Recovery After Crash

After the index breaking the 9,900 level last month, started to rise gradually. When such a crash comes there is a level where short sellers start profit taking, so there is a slight change in the trend. Secondly the prices came on the lower level that they attracted the individuals to buy shares. As the future contracts for December were over and new month started so a fresh buying in Jan contracts was obvious. Another factor in my opinion which played the most vital role in supporting the index was the news that Prime Minister has postponed the decision to levy capital gain tax for next year. This made the institutions to come to the market for fresh purchasing. We saw that the index gained about 250 points in two days.

Commentary on December 2006 Stock Crash

In the past two years we have seen some tremendous highs and lows in the stock market. Yet again we witness a major decline in the index. It all started in mid-December 2006, the causes being:

• Oil and Gas Development Corporation (OGDC) listing and undervalued sale of Global Deposit Receipts (GDRs);
• Selling in the banking sector due to acquisitions, and;
• Primarily, suspension of Callmate (CTTL) shares’ trading and the six times its pad up capital stuck in the continuous finance (CFS) and Badla market.

SBP suggests complete removal of badla financing

State Bank of Pakistan on Wednesday suggested to policy makers that badla financing in share markets be completely “removed with better risk management tools”.

It further said, “few (stock) brokers can still manoeuvre the market.”

Releasing its annual review of performance of financial markets-2006, the central bank said the March 2005 crisis hints towards market manipulation.

Though number of investors has grown tremendously over the years few big brokers can still manoeuvre the market.

The SBP said another factor instilling instability in equity markets is the presence of badla or CFS financing which it said, “Supports speculative activities without proper exposure.”

KSE March 2005 Crash: SECP Forensic Investigation Report

At the request of the Securities and Exchange Commission of Pakistan (“SECP”), Diligence USA, LLC (“Diligence”) conducted a forensic examination of certain alleged manipulative and/or illicit activities related to the stock market events of March 2005, as
transacted on the Karachi Stock Exchange (“KSE”). The primary allegations examined related to the withdrawal of regulated COT (“Carry Over Transaction” financing, also known as “Carry Over Trade” or Badla financing) and in-house Badla, wash trades, and
violations of Clause 3(b) of the Regulations Governing Futures Contracts (exceeding the Rs 50 million reporting threshold).

Index suffers sudden fall after KSE notification

Closing bell restored indices in red at the Karachi stock market following a KSE notification requesting its members to furnish information regarding in-house badla and ensure placing of shares in CDC blocked account with immediate effect on Friday.

The said notification attracted fresh waves of negative sentiments to the stock exchange that resulted in plummeting KSE 100-share index by 144.17 points to 10,705.87. While junior 30-index plunged 109.07 points to 13,219.99.

Brokers passed on their head itch to the investors, who came in panic in closing hours of the twin trading weekend sessions and sold off their intra-day purchasing and early holdings at buyers’ offer.

Financiers, brokers enjoying win-win position

One of the simplest characteristics of the bourses all across the globe is that some investors make smart profits while others lose money in the speculative equity markets. But, there are some permanent profit-makers i.e. brokers and financiers who are always in a win-win position whether the markets are rising or falling.

The position of the financiers and brokers would become more secure than ever thanks to the SECP’s recently introduced revised Risk Management System (RMS) that was otherwise generally believed to protect the interests of investors, leading analysts observed.

SECP lifts ban on short selling from Nov

Securities and Exchange Commission of Pakistan (SECP) on Wednesday decided to lift ban on short selling in futures contract from November 2006 with a condition of making necessary changes in the KAT – the trading software at Karachi Stock Exchange (KSE).

At the same time, SECP has turned down the KSE proposal to allow short selling in October 2006 futures counter that was the long standing demand of local bourse.

KSE big fish vying to arm speculators

The Karachi Stock Exchange (KSE) has recommended to Securities and Exchange Commission of Pakistan to let ‘in-house financing’ (Badla) continue for another 30 days, instead of putting a ban on it from October 2, an official source confirmed to The News here on Tuesday.

If the SECP, the apex regulator, accepts the proposal, in-house financing would be available till November 1, 2006.

Moreover, the Karachi bourse had also asked the SECP about the lifting of ban on short-selling in 30-day futures contracts, the source added.

SECP takes U-turn on its commitments

This time too, the toothless watchdog – Securities and Exchange Commission of Pakistan (SECP) – accepted the backdoor recommendations made by the managements of three bourses at a meeting held here on September 11, 2006.

In other words, the commission declined its own proposal it made on August 30, 2006 to modify Continuous Funding System (CFS).

Surprisingly, SECP has raised the number of Continuous Funding System (CFS) eligible scrips approximately to 40-45 with effect from October 02, 2006 (The final number of scrips under this system depends on the eligibility criteria SECP put forth).