December 15, 2008	Monday	Zilhaj 16, 1429

KARACHI, Dec 14: The Karachi Stock Exchange starts trading from Monday without the floor, which brought the bourse to a virtual halt for more than 100 days.

Following a staggering loss of 42 per cent in four months, the regulators had put planks under the KSE-100 index at 9,144 points on Aug 28 to prevent a further fall. Last week, the chief watchdog, Securities and Exchange Commission of Pakistan (SECP), issued a directive to the three stock exchanges in the country to remove the floor from Dec 15. But on Saturday, the Sindh High Court ordered the maintenance of status quo on a lawsuit filed by two stock brokerage firms, Al-Hoqani Securities & Investment Corporation and Creative Capital Securities.

A member on the KSE board said on Sunday that the legal counsel of SECP, KSE and National Clearing Company of Pakistan Ltd (NCCPL) were unanimous in their interpretation of the court order which they said was in respect of CFS MK-II transactions and not a restraining order on the removal of the floor.

KSE’s managing director Adnan Afridi told Dawn: “The KSE board will open regular market as per the SECP directives from tomorrow,” and added: “However, it will abide by the court order related to CFS MK-II transactions.”

Most market participants admitted that the market shutdown that had stretched to the longest ever closure of a stock market in the world had scarcely done the bourse any good.

SECP Chairman Razi-ur-Rehman Khan told Dawn that the KSE had put the floor to provide a short ‘breathing space’.

“Meanwhile, Finance Adviser Shaukat Tarin tried his best to arrange support funds,” said the apex regulator. On Sunday, Mr Tarin reiterated that he was optimistic to get the support package approved from the IMF soon. But for the time being “the floor has to be lifted without the funds”, he said.

For weeks, the government had kept investors’ hopes alive with the promise of a market bailout package of Rs50 billion. But the efforts were frustrated by the IMF restraint on use of public money for bailout of the brokers without consultations with the lender that had provided the government $7.6 billion in loan.

Although brokers and traders expressed relief over the resumption of normal market activity from Monday, they expected scant trading for at least a week. “Volume may drop to a fourth of the 250 million shares that were traded daily last year,” says an analyst.

The market generally concurred with that view, as the index was expected to touch the ‘lower circuit-breaker’ of 5 per cent (the biggest fall that could take place on a single day as per the rules) for all of the five trading sessions in the first week. Market participants believed that liquidity crunch; loss of investor confidence and foreign selling could see a downward spiral of the index by another 30 per cent.

A trader pointed out that the discount was also reflected in the ‘off-market transactions’, which had continued to take place during the prevalence of the floor on the ready market. In a couple of stocks largely held by foreign investors, the drop was foreseen to be more steep.

Many analysts put the foreign investment outflow figure at around $400 million. But they dispelled fears by suggesting that due to limited market activity, it could be two months before the foreign funds were able to pull that entire amount from estimated $2 billion that they hold under portfolio investment.