KARACHI, Feb 13: Stocks on Wednesday plunged by about 5 per cent on panic unloadings prompted by a spate of negative rumours including defaults and compliance notices in regard to members capital adequacy requirements and the KSE high-ups have, briefly to, suspend trading after the index’s mid-session fall of over 90 points to forestall a possible crash.

The KSE index fell 85.14 points at 1,666.41, eroding Rs17 billion from the market capitalization at Rs377 billion.

Forward counter also followed the lead of the ready section where blue chips fell like house of cards under the lead of Engro Chemical and ICI Pakistan, which fell by Rs5.35 and Rs2.90 at Rs77.31 and Rs48.60, respectively, followed by Fauji Fertilizer and PSO.

“The chief factor behind the sell-off was claimed members’ compliance to capital adequacy requirements within five trading sessions after the issue of notice and failure could lead to switching off their KATS terminals,” says a leading KSE member, and that “caused the market collapse from the recent highs.”

The KSE authorities later attributed the 40 minutes suspension to technical problems in the computer system and the trading was resumed after defect was removed.

The KSE 100-share index after recovering smartly during the mid-session again plunged by 85.14 points or five per cent, breaching through the barrier of 1,600 points as the leading base shares, including Hub-Power, PTCL and PSO fell sharply. It was not a big single-session as it has fallen more than 100 points many times before.

“However, the steep decline in the index value is not fully reflective of the broader market’s relative strength,” stock analysts at the W.E. Financial say, adding “push shares value of PTCL and Hub-Power by one rupee or so, the index will collapse as both have over 40 per cent weightage in it, creating panicky atmosphere.”

“I don’t think bears have more than one negative reasons to hold sway,” a stock analyst at AHRL claims, adding “it may now not be that easy to kill two birds with one stone in the changed financial scenario.”

The market resumed trading on a negative note partly because of the last two sessions sell-off and soon the rumour came that the KSE will suspend the memberships of those who will not submit their capital adequacy reports by the end of the current month followed by rumours of default of a prominent member.

“The real villain behind the game appears to be the market’s highly overbought position, which needed correction,” analysts said, adding “but bulls were not inclined to loosen their grip on the price line owing to strong positive economic fundamentals.”

But the market could rebound in the same fashion as it fell during the last three session, shedding 120 points on the strength of bullish fundamentals. Positive outcome of the President’s meeting with Bush could put the market back on the rail even tomorrow, they added.

Some negative rumours were needed to break the bulls hold that came in various forms despite the President’s meeting with Bush and the market talks of a fresh aid package and larger market access for textiles in the US.

Hub-Power board meeting is due tomorrow (Thursday) and analysts expect higher interim, but it is necessary to restore sanity to its ruling value to make it more attractive for future investment.

Energy shares led the market decline, falling sharply Rs3.70 to Rs10.95 for Pakistan Oilfields, PSO and Shell Pakistan, followed by pivotals such as Adamjee Insurance, BOC Pakistan, Engro Chemical, Fauji Fertiliser, ICI Pakistan, falling by Rs3 to Rs3.80. Lever Brothers fell by Rs39.

Most of the gains were fractional barring Clover Pakistan, Al-Abbas Sugar, Tariq Glass, PICIC Commercial Bank, Nestle MilkPak and Crescent Steel, up by one rupee to Rs2.10.

Trading volume fell to 265 million shares from the previous 282 million shares as losers held a strong lead over gainers at 147 to 44, with 31 shares holding on to the last levels, out of 222 actives.

Hub-Power topped the list of most actives, off Rs1.05 at Rs25.30 on 121m shares followed by PTCL, off Rs1.40 at Rs17.90 on 66m shares, Engro Chemical, lower by Rs3.65 at Rs79 on 18m shares, Sui Northern, down Rs1.20 at Rs12.85 on 10m shares and PSO, sharply lower by Rs10 at Rs123.90 on also 10m shares.

Other active were led by Fauji Fertiliser, off Rs3.80 on 5.405m shares, KESC, down Rs1.40 on 4.662m shares, FFC-Jordan Fertiliser, easy 85 paisa on 3.470m shares, Maple Leaf Cement, lower 45 paisa on 2.840m shares and Japan Power, easy by 35 paisa on 2.670m shares.

FORWARD COUNTERS: All the shares fell in unison on active selling, most active among them being Hub-Power, off Rs1.10 at Rs25.45 on 5.752m shares and PTCL, lower by Rs1.25 at Rs18.15 on 5.562m shares.