KARACHI, July 15: The KSE 100-share index on Tuesday plunged by 129 points or 3.5 per cent followed by panic selling by all and sundry triggered by changes in the broker exposure rules to forestall speculative manipulation of the market leading to its possible collapse at the current inflated levels.

However, it was not the largest single-session fall as it had touched the all-time low at 171.26 points on October 28, 1997, 132.57 points on May 20, 2002, and the last massive decline being 125.06 points on January 21, 2003.

The market may suffer fresh pruning when the trading resumes on Wednesday amid fears as to how the modified valuation policy of shares deposited with the clearing house against exposure limits will work, brokers said.

There is no cause for an alarm as the amended rules will be effective from July 28. A notice period of two weeks is sufficient to readjust the positions, KSE managing director Moin Fudda says.

“The clearing house is fully protected to take in any amount of selling,” he says, dispelling rumours about its possible failure to absorb the tally because of an expected massive workload. “Prior protective steps have already been to taken leading to smooth clearing.”

Some others claim the modified rules have been made an excuse, the real worry behind the sell-off was higher badla rates and business.

PSO, Fauji Fertilizer, Hub-Power, Engro Chemical, Shell Pakistan, ICI Pakistan, PTCL, MCB, Tri-Pack films may witness across-the-board fresh selling as their ruling prices are on the higher side as compared to average lower price during the last 52 weeks, according to a leading brokerage house.

“The market was in a highly overbought position and it needed correction that came in the form of amended exposure rules,” analysts said, adding “but the weakness of the energy shares after a 50-per cent cut in free-of-cost oil by Saudi Arabia may not be easily digested by it in the coming weeks.”

There was a near-panic in the market after the letters about the changes in the exposure limits and new valuation policy reached the market and there were fears that it would collapse any time during the session, but late institutional support at dips limited the decline.

Owing to the market’s meteoric rise during the last about six weeks and being in a highly overbought position, there were fears among the regulatory authorities about its possible collapse on the badla account and they decided to take some corrective measures, including the capital adequacy letters

and some changes in the brokers’ exposure rules, analysts said.

“Regular clearing of badla business despite at higher rates, however, indicate that brokerage houses are working within their exposure limits and there were no fears of default on the part of any one the active,” they said. The index finally ended partially recovered on late institutional buying at the lows and finished at 3,556.16, off 129.01 points. At one stage it was down by 151 points or four per cent amid near-panic conditions in the rings. The market capitalization also fell by Rs8.450bn at Rs792.978bn.

However, the opening was on the higher side what the dealers called the extension of the overnight run-up as it touched the day’s highest at 3,703 before coming in selling from all the quarters.

The selling remained confined to the volume leaders, while the major fall was noted in Shell Pakistan, PSO, Pakistan Oilfields, Fauji Fertilizer, Adamjee Insurance and ICI Pakistan followed by most of the second-liners barring the cement sector, which maintained its upward drive.

Energy shares received massive battering followed by reports that the Saudi government has reduced the concessional oil facility by a half as Pakistan now is in a comfortable financial position to pay its liabilities.

Major losers were led by Glaxo-SKF, BOC Pakistan, PSO, Javed Omer, Shell Pakistan and Unilever Pakistan, which suffered fall ranging from Rs7.50 to Rs49, the largest being in Unilever Pakistan. The entire list was strewn with sharp fall both in the pivotals as well as second-liners.

Some of the leading shares managed to put on good gains under the lead of Janana Demalucho Textiles, Al-Abbas Sugar, Sindh Alkalis, Bestway Cement, Gadoon Textiles, Pakistan Services and National Refinery, up by Rs1.40 to Rs8.05.

Trading volume fell to 525m shares from the previous 603m shares as losers forced a strong lead over the gainers at 341 to 60, with 29 shares holding on to the last levels.

PTCL topped the list of most actives, off 20 paisa at Rs30.85 on 82m shares, Hub-Power off Rs1.85 at Rs38.50 on 78m shares, FCC-Jordan Fertilizer, lower 75 paisa at Rs15.15 on 58m shares, D.G. Khan Cement, lower Rs1.20 at Rs34 on 53m shares and PSO, off Rs10.70 at Rs237 on 30m shares.

Other actives were led by Bosicor Pakistan, lower 20 paisa on 26m shares, Dewan Salman, off one rupee on 14m shares, Maple Leaf Cement, lower one rupee on 11m shares, Engro Chemical, off Rs4.25 also on 11m shares, and Sui Southern Gas, higher by 60 paisa on 10m shares.

FORWARD COUNTER: Speculative issues on the forward counter also came in for heavy selling and fell sharply under the lead of PSO, off Rs10.35 at Rs238.30 on 18m shares and Engro Chemical, lower Rs4.35 at Rs87.25 on 3m shares.