KIBOR declines by 86bps to 12.4%

Karachi: The Karachi Inter-bank Offered Rate (KIBOR) has been reduced by 86 basis points from 13.26% to 12.4% led by a 150 basis point cut in the discount rate by State Bank for Oct-Nov 2011.

According to Alfalah Securities Limited, Kibor is a daily average of rates used as a benchmark for lending and borrowing between the banks in Karachi. A decline in Kibor rate would bode well for the highly leveraged sectors such as cements, textile, power and Engro Corp. in particular owing to a linkage of their debt servicing with the Kibor rate hence, the highly leveraged sectors would incur a lower finance cost due to this recent cut. A fall in Kibor rate would also decrease the returns of Kibor linked floating rated Term Finance Certificates (TFCs).

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