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Index drops 4pc as investors sell blue chips

KARACHI - Pakistani stocks fell over 4 per cent to their lowest level in more than two years in intra-day trading on Wednesday, as investors sold blue chips such as OGDC on political tension, forcing authorities to consider steps to stabilise the market. An official from the Karachi Stock Exchange said its board of directors met after 0900GMT to decide on steps to stabilise the market.

The exchange had met representatives of top stock brokers earlier on Wednesday. No further details were available, and decisions from the meeting were expected to be a n n o u n c e d l a t e r o n Wednesday.

The benchmark Karachi Stock Exchange index closed down 3.03 per cent at 9,144.93 points, after falling as much as 4.6 per cent to a low of 8,999.36 points, a level last seen in June 2006. Tanvir Abid, the head of institutional sales at IGI Securities, said in a note to clients that the exchange received proposals to freeze the benchmark index at its Wednesday’s closing level and to suspend trading at its earlier meeting with stock brokers.

A proposal to freeze the index could be done by setting a floor to share prices to ensure they do not fall below Wednesday’s closing levels, Abid said. Dealers said the market’s steady decline in the past week and uncertainty over the government’s future had unnerved investors, who were selling their shares to raise money to cover losses on Wednesday.

“There is still a lot of uncertainty on the political front. People just want to get out of the market,” said Sajid Bhanji, a dealer a t A r i f Habib Ltd. “People were selling on margin calls,” he said.

The coalition government broke up on Monday when the alliance’s second biggest party, headed by former prime minister Nawaz Sharif, pulled out.

The stock market has fallen for six consecutive sessions since August 20, snapping a two-day recovery a f t e r President Pervez M u s h a r r a f ’ s resignation.

The KSE index has lost 43 per cent since hitting a record high of 15,739.28 points on April 21. Pakistan’s stock market, which rose for six consecutive years from 2002, and was one of the top performers in Asia during that period, has skidded 36 per cent this year on political tension and a shaky economy.

The market is now the third worst-performing in Asia after China and Vietnam. The Pakistani rupee, hovering near a record low, strengthened 0.6 per cent on Wednesday as some export firms bought the currency to convert their dollar revenues.

Inflation in Pakistan is soaring, the trade and fiscal deficits are rising, and high oil prices have depleted foreign exchange reserves.

Investors are worried political tension will slow foreign investments, making it hard for Pakistan to pay for imports. Energy company OGDC, Pakistan’s biggest firm by stock market value, was down 5 per cent.

The privatisation commission said on Tuesday it was assessing privatisation options for OGDC such as selling shares and assets including Qadirpur Gas Field on a “fast track basis”.

MCB Bank, Pakistan’s biggest bank by market capitalisation, was down 5 per cent, and Habib Bank Pakistan Petroleum fell 4.5 per cent.