KARACHI, Nov 27: Stocks on Wednesday plunged by 2.5 per cent on panic selling triggered by the US threat of sanctions if its nuclear links with North Korea were established but Pakistan denied the allegation.

The sell-off was more pronounced on the forward counter where ICI Pakistan, Engro Chemical, MCB and PSO received massive battering, falling by Rs1.50 to Rs7.60, PSO being on the top.

How will the bulls react to the latest threat to their dominance of the floor is unclear. Whether or not they will allow further price erosions or halt the decline will be witnessed during the next couple of sessions.

The KSE 100-share index breached through the psychological barrier of 2,300 points at 2,285.48, off 53.26 points as there were more sellers than buyers as is reflected by a light turnover.

The market capitalization fell by Rs10.203 billion at Rs519.257 billion owing to heavy battering received by the leading shares.

Opinions are, however, divided over the US threat, says an equity leader adding “technically speaking the market was in an overbought position and needed a correction and it was hastened by the perception of a weak government at the centre”.

Being a front-line country in US war against terrorism, Pakistan has denied its nuclear exchange linkage with North Korea, press-driven drive against the most trusted ally of America continues to coin new theories about the alleged ties.

There was a confusion all around in the backdrop of the US threat and as the trading resumed, investors sold in a bit haste to get out of the market fearing a fresh sell-off.

“The threat is not genuine,” claims a leading broker “bears have been on the look out of an excuse to overrun the bulls standing on high roofs and they found one in the US threat”.

Leading stock analysts also term the threat a psychological move aimed at for public consumption in the US and as far as sanctions are concerned they may not be around in the current typical political relations between the two countries.

“Pakistan has gone an extra mile to oblige the US and support its world war against terrorism”, they said “it may not be repaid for the services including its soil it has rendered during the last one year so to the US”.

But MMA threat after assuming power in the Frontier Province to stop the current drive against the Al-Qaeda and to ask the US to vacate its Pakistani air bases could upset the current norms of close relationship between the US and Pakistan in the coming weeks, they fear.

Overvalued shares in all the sectors, notably in the energy and chemical groups led the market decline on active selling. PSO and Shell Pakistan were leading among the losers, off by Rs7.25 to Rs12.30 followed by Pakistan Oilfields, Pakistan Refinery and Unilever Pakistan, lower by Rs5 to Rs6.10.

Some of the leading shares managed to finish modestly higher under the lead of Punjab Oil, Blessed Textiles, Faisal Spinning, Dawood Hercules and Shell Gas, up by Rs1.50 to Rs5.

Trading volume rose to 128m shares from the previous 113m shares but losers forced a strong lead over the gainers at 227 to 50, with 47 shares holding on to the last levels.

Hub-Power came in for active selling, off 50 paisa at Rs28.35 on 35m shares followed by PTCL, easy 35 paisa at Rs22.15 on 23m shares, PSO, off Rs7.25 at Rs181.95 on 13m shares, Sui Northern Gas off 45 paisa at Rs17.85 on 6m shares, National Bank, lower 70 paisa at Rs24.85 on 5m shares and ICI Pakistan, off Rs1.30 at Rs45.60 on 3m shares.

Other actives were led by Commercial Union Life Assurance, up 90 paisa on 4m shares, FFC-Jordan Fertilizer, lower 20 paisa on 3m shares, D.G.Khan Cement, off 30 paisa also on 3m shares and Dewan Motors, lower 50 paisa on 2m shares.

FORWARD COUNTER: PSO came in for active selling and fell sharply lower by Rs7.60 at Rs181.90 on 7m shares followed by Hub-Power, lower 50 paisa at Rs28.30 on 6m shares and PTCL, lower 33 paisa at Rs22.20 on 4m shares. Sui Northern Gas fell by 50 paisa at Rs17.90 on 2m shares.