August 27, 2008 / 7:40 PM / 11 years ago

Pakistan sets floor on stock index

KARACHI (Reuters) - Pakistani stock exchange authorities set a floor of 9,144 points for the Karachi Stock Exchange index on Thursday following heavy losses in recent days, the exchange said.

A Pakistani paramilitary soldier stands guards at the Karachi Stock Exchange. REUTERS/Athar Hussain/Files

The stock market has fallen for six consecutive sessions since Aug. 20 and has lost 43 percent since hitting a record high of 15,739.28 points on April 21.

“The continuous sharp decline in share prices can have implications for the wider financial system,” the board of directors of the Karachi Stock Exchange said in a statement.

“With this in mind the board ... decided to place a floor based on closing prices of securities on Wednesday,” it said.

“The individual security prices will remain free to trade within the normal circuit breaker limits, but not below the floor price level as mentioned,” it said.

The measure would remain in place until further notice, it said.

Pakistan’s stock market, which rose for six consecutive years from 2002, and was one of the top performers in Asia during that period, has skidded 36 percent this year on political tension and a shaky economy.

The market is now the third worst-performing in Asia after China and Vietnam.

The index fell more than 4 percent to its lowest level in more than two years in intra-day trading on Wednesday and ended 3.03 percent lower at 9,144.93 points.

A broker said the measure would help, at least for the short-term.

“Its going to be a good news at least for a short time because the market was constantly going down,” said Shuja Rizvi, director at Capital One Equities.

“In the meantime, the authorities should work on long-term measures to boost sentiment. Perhaps they should have done it earlier,” he said.

However, Asad Iqbal, a broker at Ismail Iqbal Securities, told Reuters: “The measures are likely to cause some doubt in the minds of foreign investors as to the strenght of KSE as an institution given the frequency of rule changes.”

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