August 28, 2008	Thursday	Sha'aban 25, 1429

KARACHI, Aug 27: The Karachi Stock Exchange put a floor under individual stock prices prevailing at the close of the market on Wednesday, freezing the index at the 9,000-level it stood at close on Wednesday.

The mechanism was believed to have been put in place after a nod from the apex regulator — Securities and Exchange Commission of Pakistan.

“The proposal simply means that stock prices will not be able to slip below the price prevailing at the close on Aug 27,” KSE managing director Adnan Afridi told Dawn.

He said the price of a stock, say at Rs50 on Wednesday, could be bought at higher price (within the normal circuit-breaker limits i.e. a maximum rise of five per cent) say at Rs52 on Thursday, but not below Rs50. The next day, the scrip could rise further or shed the earlier gain of Rs2, with the floor remaining at Rs50 every day.

He said that the new mechanism would be effective from Thursday and might remain in place until “normal market forces start to operate”.

Mr Afridi said that the step had been taken not just to stabilise the stock market, but also to prevent the financial system from collapse as a result of a domino impact.

The decision to freeze the stock prices came after 121 of the 123 members present at an emergent general body meeting of KSE stock brokers voted in favour and the board of directors endorsed the proposal.

“The board took all participants, including financial institutions, mutual funds and foreign funds, into confidence before forwarding the proposal to the SECP,” Mr Afridi said.

Earlier during the day at around noon, all voices drowned amid shrieks and screams of brokers and traders as the KSE-100 index breached the 9,000 level for a short time to touch 8,999 points. The index clawed back to close at 9,144 points.

But panic was thick in the air. In order to preclude recurrence of a recent violent investors’ protest, the KSE management called in the police, which kept their distance.

The KSE has been in turmoil for the last four months, witnessing a collapse of almost 55 per cent in stock values as index has dipped by a staggering 5,600 points from its high of 15,760 points on April 20. The stocks are down 33 per cent since the start of the year.

“The market is starved of liquidity,” said Aqeel Karim Dhedhi, a leading stock broker. He blamed monetary policy, erosion in the rupee value and lack of investors’ confidence for the crisis.

Analysts said the KSE’s step would provide the market a ‘breathing space’, which, they thought, was required to calm investors’ fears.