The level of CFS investment at KSE fell below the upper limit of Rs 25 billion after a gap of seven weeks. The investment level at the weekend (October 21), stood at Rs 23.5 billion, which was an eight-week low.
The three sharp jolts of 200-plus points did serve to shake out some of the leveraged positions. The weighted average CFS rate, with demand for financing falling, settled at 13.5 percent on Friday (October 21) as against a level of 21.6 percent seen on previous Friday (October 14).
The CFS investment level at LSE, however, remained capped at Rs 2.3 billion on Friday, with the weighted average rate settling at 21.3 percent. On weekend-to-weekend basis, the rates witnessed a decline of 310 basis points.
During the week, open interest in October contracts touched its highest level at Rs 15.8 billion on Monday, after March 30, 2005 open interest of Rs 28.7 billion. Highest open interest of Rs 40.3 billion was on March 16, 2005. However, due the bearish market trend, open interest ended the week with 1.8 percent decline at Rs 14.5 billion, compared to Rs 14.8 billion on previous Friday.
The new week (starting October 24) is the rollover week and outstanding position of Rs 14.5 billion on Friday needs to be rolled over from October to November, or elsewhere other sources of funding should be arranged. A smooth transition remains a question mark this time with such high open interest available for transition and badla at cap and that was why market sentiment was negative last week.
Historically, about 60-70 percent of the outgoing futures contracts is transferred to the new contract. However, last month an analyst from Jahangir Siddiqui Capital Market said he saw that only 46 percent of August's open interest of Rs 8.1 billion was transferred to September contracts. Moreover, it has also been observed that the market remains under pressure in the rollover week due to selling pressure by leverage buyers on the futures counter. As per an analysis, the market closed in negative territory in majority of cases (2:3) in the rollover week as compared to the remaining of the period (1:4).
Due to weak market sentiment and selling pressure witnessed ahead of rollover week, ready futures spreads were observed on the lower side in the outgoing week. As per working, weighted average spread at KSE was recorded at 25.0 percent, down by 820 basis points, compared to 33.2 percent recorded a week earlier. Average daily futures volume was recorded at 150 million shares as against 132 million shares recorded previously. Interestingly, average turnover in stock futures was 50 percent of average ready market turnover.