KARACHI, March 5: Stock prices at the Karachi Stock Exchange slipped on Monday in sympathy with the global equity meltdown. The KSE-100 index fell by 234 points, or two per cent, as Asian shares plunged by three to five per cent during the day.

In New York, the Dow Jones again opened on a weak point — it had lost 4.2 per cent during the week ending on Friday, marking its worst week since March 2003. A number of factors, led by China’s stock market decline, have contributed to the bearish trend around the globe.

Traders at the KSE feared that a further sell-off in Asian equities could force foreign funds to seek exit from emerging markets. But Nadeem Naqvi, CEO at AKD Securities, argued that it had not happened as yet to the Pakistani bourses.

“Following the huge inflow of $250 to $300 million in the last 10 weeks, the Pakistani stock prices have soared as local investors buy equities in anticipation of more foreign fund buying,” he said.

Mohammad Sohail, a research analyst at JS Global, said that since foreigners now held five per cent of market capitalisation and 20 per cent of the share free float of KSE, even a slight movement from them can cause ripples in the local bourses.

Hettish Karmani, an analyst at Atlas Capital Markets, said that for the local market, the issue was not as much as of foreign ‘selling’, but of fresh ‘buying’, which he believed had come to a screeching halt.

Traders said that funds in Futures & CFS markets — most of which were thought to be speculative — amounted to a staggering Rs60 billion ($1 billion) and panic selling by those weak holders had been driven by ‘fear factor’. The KSE had also lost 475 points (4.1 per cent) the previous week. But several analysts said that the plunge in prices in local bourses was less due to international concerns and more due to the market’s regulatory unsettled issues.

Stock brokers frowned upon the Client Level Netting (CLN) system, which was implemented on Monday. “It has made liquidity and exposure management difficult for brokers and would pull volumes down,” said a member of the Karachi Stock Exchange.

Volume in the ready market was 116million shares on Monday, compared with the year’s average daily turnover at 214 million shares. A trader pointed out that the major issue haunting the market on Monday was the ‘collection of margin from institutional investors’.

A meeting was held between the KSE and the Securities and Exchange Commission (SECP) in the evening to resolve the issue. Fund manager Naseem Beg said: “Institutions (banks, mutual funds, insurance companies and others) support the measures, but wanted some kind of ‘mechanism’ or a support system that could provide comfort to institutional investors.”

Most stock strategists thought that the market concerns were overblown. Nonetheless, they advised investors to remain sidelined and wait for the turn of the tide in global equity markets.

That, according to them, could come in a couple of weeks as US Federal Reserve was expected to slightly lower interest rates in an effort to calm investors’ fears.