Pakistan mulls freezing stocks to cap downfall (Roundup)

Aug 27, 2008, 16:41 GMT

Karachi - Pakistan's stock brokers and government were negotiating on various market stabilization measures, including freezing prices at current levels till the turbulent political situation improves, traders said on Wednesday.

In an emergency meeting the board of directors of Karachi Stock Exchange decided to impose a cap at 9,000 points in the benchmark KSE-100 Index, which has so far lost over 45 per cent since January, including 12 per cent in just one week.

But their decision was soon rebuked by state corporate watchdog, the Securities Exchange Commission of Pakistan (SECP), citing it as 'too artificial', market sources said.

Sources said a final decision would be taken late night or on Thursday morning before the opening of the market, otherwise, some top brokers had threatened that if the SECP failed to adopt any measures then the Karachi bourse would go on a strike.

The KSE directors were trying to have an urgent meeting with Finance Minister Naveed Qamar but sources said he was not avilable.

'We expect a decision from him anytime late tonight or in the morning,' said Saad bin Ahmed, head of research at Capital One Equities.

Another suggestion to halt continued slide is to impose a one per cent cap on the downfall, something which was also practiced couple of months back for around 30 days.

The hotly contested Sep 6 presidential election, following this week's breakup of parliamentary coalition, is also creating panic in the market over political instability.

The Pakistan Peoples Party, which leads the government, has nominated its leader Asif Ali Zardari, the widower of slain Benazir Bhutto, for president.

Zardari's past is tainted with scandals of murders and corruption involving billions of rupees, and it hangs like a dark cloud over the confidence of many investors.

'If Zardari becomes the president it will be hard for anyone to consider Pakistan as a safe place for investment,' said one leading broker, who requested anonymity.