KARACHI, Dec 26: There were screams of joy at the Karachi stock market on Friday as 100-share index raised its head out of the sea of red for a brief moment, five minutes after the start of trading.

At the end of the session, more stocks were seen to have gained value (102), compared to the losers (97), in brisk activity in 106 million shares. The quantum of stocks that changed hands was almost twice that of the previous trading session on Wednesday.Market participants suggested that solution of the critical issue of unsettled sum of Rs7 billion in the Continuous Funding System (CFS MK II) or ‘badla’ had reinvigorated the investor interest. But many analysts cautioned that what looked like a recovery, might only be a respite.

“The market has yet to face plethora of problems,” says a trader. Those he said related to the settlement of bank margin financing of the order of Rs44 billion; the loss of value of collaterals; the redemption issues of mutual funds; the capacity of the market to absorb selling by foreign investors and weak local holders; the fulfillment of promise of beginning of buying by NIT-managed funds from Monday and the smooth application of the agreed solution to the stuck-up CSF amount between the financiers and the financees.

Economy and the muscle flexing on the country’s eastern borders were for the time being ignored.

On Friday, further developments on the CFS unsettled stocks moved in the right direction. In an early morning meeting, participated by Najam Ali, the chairman of the CFS Committee set up by the advisor to the Prime Minister Shaukat Tarin on Wednesday; Ali Ansari, the chairman of the National Clearing Company Pakistan Limited (managers of the CFS market) and Adnan Afridi, the Managing Director of KSE, finalised the operational details of the CFS settlement agreement reached the day earlier.

Later in the afternoon, the board of directors of NCCPL and the KSE separately approved the proposed plan.

By virtue of the agreement reached between various stakeholders, the CFS MK II stuck up net amount of Rs7 billion would be split in two equal halves, one part each to be picked up by the financiers and government-controlled institutions at a discount of 12.5 per cent to the closing stock prices on Dec 24.

Informed sources told Dawn that the financees (borrowers) would have the option either to take delivery of shares or sell them to the two proposed buyers.

It was also revealed by sources that a special session to settle the CFS would not be held, but the settlement would go through in the ordinary course of trading.

A market participant said that many of the 30 stock brokers ‘suspended’ by the NCCPL for non-payment of mark-to-market losses earlier in the week, had already moved out of the harm’s way. That might avert mass defaults and a threatened market systemic risk. A broker said that if and when the Members Protection Fund was activated, it could release Rs2 billion.

“Meanwhile, the financees who had moved Supreme Court, pleaded for adjournment of the case until Monday, since an “out of court settlement” was under way,” said a broker closely watching the events.