KARACHI, March 24: Looking at the lower locks for the sixth trading day in a row on Thursday, small investors at the Karachi Stock Exchange (KSE), who are losing 5 per cent of the value of their holdings for each day and are still unable to seek an exit, resorted to violence. Over 300 angry people who had gathered outside the trading hall, ransacked the bourses’ property and tried to destroy whatever they could lay their hands on. They damaged some cars and pelted the trading hall doors and windows with stones.

Police was called in and order was restored after some time.

Some of the more disappointed and violent young men were detained by police. However, the crowd which had been pushed behind a barricade set up by police kept chanting slogans against the bourse and regulators.

As a measure to avoid sharp fluctuations in stock prices the bourse has placed what are called ‘circuit breakers’ that restrict the upper movement of the stock by 7.5 per cent and lower to 5 per cent. After climbing 72 per cent this year and sky-rocketing to 10,000 points, the KSE-100 index took a sudden plunge almost a week ago. As panic selling ensued, that has intensified each trading day. Shareholders who wished to dispose of their holdings have been unable to do so as within seconds of the opening of the market, prices fall by 5 per cent and are ‘locked’.

The mechanism though works fine in normal times, but has eroded shareholders’ value by about 30 per cent in a week, due to the consistent fall in prices.

The current crisis erupted after the wide gap of 30 to 100 per cent between prices in the ready and the March future contracts. Rumours circulating in the market have created panic of possible heavy defaults as brokerage houses may not be able to make settlements.

At 8.30 a.m on Thursday, the board of directors of the KSE held an emergency meeting which decided to extend the last date for closure and settlement of March contracts by a week from March 30 to April 7. It is intended to give a breathing space to the March Futures contract holders. But the strategy did not work. And the market plunged by another 370 points taking the total toll of around 2000 points during the current bear rampage.

But for all that some of the big brokers spent the day trying to calm investors and initiate buying by local institutions, high net worth individuals and mutual funds and some foreign investors

Aqeel Karim Dhedhi (AKD), one of the most powerful brokers, said his house had attracted investment of over Rs 1 billion during the day.

Ali S. Malik, chairman of the First National Equities Limited (FNE), reiterated on Thursday that it had no positions in the share of Oil & Gas Development Company (OGDC), which due to its heavy weightage in the index was at the heart of the problem. The OGDC stock stood locked at Rs 144.05 losing Rs 7.55 on Thursday.

While no-one really seemed to know how to extricate the Exchange out of the dismal situation, AKD said that the mutual funds and financial institutions had offloaded stocks valuing Rs 50 billion for profit taking.

“If just Rs 5 billion of that money is pumped back into the market”, the situation would revert to normal, said AKD.

The business on Thursday had trickled to just a tenth of the normal daily trade, but optimistic analysts said that all of that could be genuine buying; which was distinct from almost 80 per cent of the speculative trading that prevailed at the KSE on a normal day.

Moin M. Fudda, managing director of the Karachi Stock Exchange, could not be reached for he was in a marathon meeting that began at 2 in the afternoon and was said to be in session until well past 11.

But Mr Fudda had earlier affirmed that there were no settlement and exposure problems yet Mr Fudda also had warned small shareholders not to expose themselves in the over-heated market, when the index zoomed past the 8000 mark.

In spite of the doom and gloom, major market players and management were trying on Thursday to calm investors’ fears. “Let the March forward contracts settle smoothly and buyers would return”, said one analyst. His reasoning was that due to the heavy fall, the share values were now quoting at hugely discounted prices and would be lapped up by the investors, once the current situation is over.