KARACHI, Oct 24: Until at around mid-night on Friday, the special trading session supposed to be held on Saturday stood shrouded in uncertainties as no official word was heard from either the regulators, the Securities and Exchange Commission of Pakistan or the KSE.

Investors were left to fend for themselves. But credible sources suggested that a disagreement at the last moment between the regulators (either the SECP and the KSE or the members of the KSE themselves) had put the session in jeopardy.

Sources said that a final decision would have to be awaited till the meeting of the KSE stock brokers at 11:00am on Saturday, about two hours prior to the proposed start of the special trading session at 1:00pc in the afternoon.

Earlier throughout the day, it was understood that a special session at the KSE would be held for two hours in the afternoon on Saturday, in which the newly-constituted Market Stabilisation Fund of Rs20 billion would come into play, picking up shares of nine pre-identified stocks in the CFS ‘badla’ market and those pledged with the banks.

The fund would buy stocks at a discount of 12.5 per cent to the ‘floor’ price.

Information gathered from brokers and traders suggested that at the out-of-the-ordinary trading session the National Investment Trust (NIT), the fund managers entrusted with the task of building and running the government-sponsored Rs20 billion market stabilisation fund, would buy shares of OGDC; PPL; PSO; SSGC; SNGPL; KAPCO; NBP; HBL and PTCL (the last two not the government entities and added in the list released on Friday).

The stocks collectively hold around 30 per cent weightage in the KSE-100 shares index.

Informed sources said that the fund would buy stocks worth Rs3.5 billion of the above nine entities in the ‘badla’ market, where the aggregate value of all leveraged stocks stood at Rs11.6 billion.

In addition, the fund would purchase the nine stocks pledged with the banks valuing Rs4 to 5 billion, out of the total pledged stocks of Rs30 billion.

Brokers stood divided on whether it was best for the market that the leveraged stocks (in CFS and bank pledged) were being bought by the Fund.

“It will stem to some extent the risk of market and clearing house defaults”, said one participant, but another broker was aghast at the government’s decision to be choosy in investment in its own stocks and two of the private sector and also to bail out the leveraged buyers.

“This smells of discrimination against the genuine investors in private equities and against those who have deliveries of the stocks”, he said.

Brokers and traders said that the fund management skills of Tariq Iqbal Khan, the chairman and MD of NIT, would come to test, since he has been saddled with the task of managing funds in the staggering sum of around Rs150 billion (Rs70 billion of NIT; Rs20 billion Equity market Opportunity Fund; Rs20 billion of market stabilisation fund and Rs30 billion government guaranteed ‘put option’ funds for foreign investors).

On Friday, NIT released a notice to the three stock exchanges informing that the Trust would be offering European style put options to the foreign investors with one year maturity, backed by sovereign guarantee, on the selected government securities. The list contained nine stocks including the seven state-owned entities and PTCL and HBL.

NIT told the bourses: “You may get in touch with prospective customers so that they may start preparations to accept these put options”.

But many analysts feared of an avalanche of sell orders from foreign funds given the “once in a century financial tsunami—Greenspan” in the stock market around the globe and the local regulator’s unwise decision to curtail free movement by the imposition of ‘floor’ at the index level of 9,144 points two months ago on Aug 27.

No one was sure how the Pakistani equity markets would react to the trading after removal of the floor, but everyone was praying for absorption by the fund of likely panic-selling supported by local institutions.

Some brokers also talked of NIT leading other institutions EOBI; State Life; NBP into injecting Rs5 billion on Monday to buy stocks.

Taking the off-market transactions at 20 per cent to the ‘floor’ price as an indicator, investors appeared to have developed risk appetite for that amount of loss.

“A substantially greater fall than that would be heartbreaking,” said an investor who hoped to be able to salvage Rs1 million of the Rs7 million he had invested in equities early this year.

All of that money, he said, he had received in a golden handshake from a bank for 37 years of toil and tears.