KARACHI: The Pakistan Stock Exchange (PSX) has included an additional 28 listed companies fit for trade on financing provided by banks and brokerage houses after the apex regulator softened rules for their selection criteria.
This move is aimed at increasing the credit limit available for investors, energise trade activities and support uptrends at the bourse after it suffered a massive fall in 2017 to be the worst-performing market in the world.
The PSX's move now takes the number of securities eligible for Margin Trading System (MTS) - a financing product - to 56 from 28 last month. The product is operated under the management of the National Clearing Company of Pakistan Limited (NCCPL).
Investors holding positions in the MTS were allowed 28 stocks that provided them financing worth Rs3 billion in the last week of December 2017, NCCPL CEO Muhammad Lukman told The Express Tribune recently.
"Positions peaked somewhere between Rs8-10 billion sometime in June-July (2017) when the market was hovering near and around its all-time high below 53,000 points," he told.
The credit limit is expected to thrive again after the Securities and Exchange Commission of Pakistan (SECP) approved regulations allowing financing to less-traded stocks under a newly introduced category 'B'.
Category 'A' enlists only those stocks that have been traded in a minimum 90% trading sessions under the review period. The regulation has been softened to stocks that have been traded in a minimum 70% sessions to fall under category 'B', it was learnt.
However, the regulations dealing with the 'risk management' system of the additional securities in category 'B' have been made 'stringent' for financing as they will be a little less traded than the ones in category 'A', Lukman said.
Traders are provided credit against 25% cash deposits (including cashable collaterals) for eligible securities in category 'A', while this cash deposit margin for class 'B' has been increased to 30%, he added.
Under the exercise to find stocks eligible for financing in the two different categories, the PSX has found 34 securities fit for the financing in category 'A' and 22 securities in category 'B'.
The lists of eligible securities will be applicable from the opening of March 2018 Deliverable Futures Contracts ie DFC-March 2018 Contract and May 2018 Cash Settled Futures Contracts ie CSF-May 2018 Contract, the PSX said in notifications at its official website.
The stocks in both categories are from among the top 100 companies grouped in the PSX benchmark KSE-100 Index.
The index dropped 1.06%, or 461.56 points, to close at 42,933.72 on Friday. The fall was due to profit-taking across the board and comes after the KSE-100 recovered in the last two weeks.
Published in The Express Tribune, January 13th, 2018.
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