KARACHI, Nov 18: With the ‘floor’ securely in place, the problems at the Karachi Stock Exchange are multiplying by the day.

Following the count of 82 days of closure, the longest ever in the history of stock exchanges anywhere in the world, most market participants and insiders of the regulating bodies admit that the situation has come to such a pass that it looks neither safe to remove the ‘floor’, nor to keep it intact.

A person in high place, on condition of anonymity says: “It is damned if we do and damned if we don’t”.

The stock brokers stand clearly divided on the issue. If the ready market provides no indication of the investor sentiments, the off-market transactions are a clear reflection of the lack of confidence.

On Tuesday, in the ready market only five shares were traded with the historic low volume of 19,660 shares. Many times more shares change hands in the off-market.

But the prices they fetch are staggeringly low. Recently MCB was traded at 55 per cent discount to the floor price. If that was incredible, a small volume in blue chip stock PSO went for as deeper discount as 60 per cent.

A responsible person, who also asked not to be named, said that from Aug to date, 20 top scrips had traded in off market at 15 to 17 per cent below the floor price. But he conceded that in the last one week, the gap had widened up to 20-25 per cent.

He tried to assuage concerns saying that both MCB and PSO had gone that cheap since they were held by two foreign hedge funds that were going into liquidation and had no choice but ‘force sale’ their relatively small holdings.In Islamabad, there was little concern, if at all about the fate of KSE. The responsible person there harped on the old tune of receipt of IMF funds.

When pointed out that Shaukat Tarin, the top finance adviser, had categorically stated that none of that money would be used to bail out the brokers; the responsible man fell silent and after a while murmured that the proposed Rs20 billion market stabilisation fund was awaited.

Traders said that peering as far as they could; there was no sign of the Fund. People seemed to have stopped waiting and watching and longing for that either.

So where is the market headed? “Nowhere”, says a major stock broker.

And what are the recent complications? The Court has stayed the sale of membership card of defaulter broker, Ismail Abdul Shakoor, which the bourse says translates into suspension of settlement of claims of the claimants and there is the ‘black hole’ of client sub-accounts allegedly misused by some brokers.

The responsible person dispelled the impression that 600 complaints had been lodged with the ‘arbitration committee’ of the KSE. He argued that there were about 100 complaints, but he could not figure out the amount involved. The matter that is being swept under the carpet relates to sub-accounts that clients open with stock broker and deposit shares. The broker is not supposed to touch them. The responsible man, however, observed that the account opening form contains the statement (even if in fine print) that broker can pledge those shares with banks.

“It is at the banks end that the problem emanates,” said he, but agreed that banks were justified in refusing to release the shares until the brokers’ clears their over-draft (which was difficult under the circumstances). And so is the complication.

The man in high authority expressed his honest opinion that even if the funds of Rs20 billion were to be available, it was difficult to see how the market could stabilise, until the banks agree to release liquidity and finance trading in shares.

But most analysts agreed that it would be the dumb bank manager and the one who wants to see the exit door who would lend cash for stocks, until the thick clouds of uncertainty are dispelled and the market finds its right level.

What is the investor who is in desperate need to sell shares and use cash for other pressing needs, to do? “Keep his fingers crossed”, said a disillusioned investor, adding, “and pray”.