KARACHI, Nov 22: The Board of Directors of Karachi Stock Exchange suspended trading in Hub Power Company Limited (Hubco) on Thursday, while the bourses’ management was busy in trying to unravel the mystery of the Hubco’s forged fax saga.
Investors in stocks had, presumably, taken positions in Hubco for a quarter of an hour on Tuesday and all of the day on Wednesday on the back of announcement made by the Exchange that the Lenders’ approval of final dividend had been received. KSE had passed on to the investors the information it received through a fax message and purported to have originated from Hubco’s offices. A day later, the power utility disowned the dividend approval announcement. The meeting that followed between KSE and the representatives of Hubco came to the conclusion that the original fax was a forgery.
The dilemma before the Exchange early Thursday morning was how to settle the deals. Obviously, some people ought to have made big money at the cost of hundreds of small investors; the Hubco scrip accounting for nearly a half of the average daily volume of 100 million shares, on any given day.
A former President of the KSE and still an influential stock broker said that he had heard of many proposals that were being discussed. But he thought that an agreement had perhaps been reached on squaring up all deals at Wednesday’s closing rate of Rs19.45. “It may not be fair to all, but would be a better option than cancellation of the entire trade,” he said. He argued that there were precedents when transactions were cancelled: once when the announcer mistakenly read 60 for 6 per cent dividend by CresBank and again when the trading had continued for sometime beyond the closing bell.
Noman Ahmed, managing director KSE, ruled out the possibility of cancellation of all trades that took place in Hubco, between the announcement on Tuesday and the end of session on Wednesday. He told Dawn that initial investigations had shown no major gainers. He did, however, say that all trades were being minutely scrutinised to identify a faulty pattern, if any. The KSE MD stated that the markets would open up on Saturday, after the normal closure on Friday. He referred to tightening up of some of the loose knots to prevent such future mishaps: installation of CLI system; hand-delivery of announcements by corporates and other measures would be put into place.
But the market was under a fog on Thursday; aggregate volume plummeting to 24 million shares—nearly 70 per cent down from 76 million shares traded the day earlier. Brokerage house Invest Cap termed the incident “one of the biggest frauds of its kind”. Everyone agreed that it had shaken investors’ confidence.
Most brokers and analysts were pinning the blame on Hubco. While agreeing that there was nothing in the law for Hubco to either confirm or deny rumours, analysts said that KSE had actually made an announcement supposedly originating from Hubco and the company should have immediately responded with a denial. Even the KSE MD, thought that sitting over an important price-sensitive information for 26 hours, before making a call to him to disown the statement was “questionable” on the part of Hubco, which he said was run by professional management. He said that enquiries would include investigations into the possibility of involvement of Hubco employees as well as the interest of company directors in the stock.
Answering through an intermediary, the Hubco corporate director and spokesman, Sardar Yousuf Khan, declined to entertain Dawn’s queries, saying that the company was involved in intensive talks with the Exchange and he would not want to offer a comment for the moment.