Pakistan's key stock index falls to a three-year low

Karachi: Pakistan's benchmark stock index fell to its lowest in more than three years following the removal of trading limits as a court delayed making a final decision on the rolling over of funds to purchase shares.

A court in Karachi that had asked brokers to furnish bank guarantees at its last hearing has delayed a final decision.

Brokers who cannot repay funds borrowed to purchase shares want the court to extend the continuous funding system.

The benchmark Karachi 100 Index dropped 296.96 points, or 4 per cent, to 7,217.46 at the 2:15pm local time close, the lowest since August 17, 2005. The key index has lost 21 per cent in six days with three out of five stocks not trading.

The Karachi Stock Exchange on December 15 ended a four-month- old restriction on stock trading aimed at preventing the benchmark index from falling below its August 27 level.

The limits had shielded investors from a record plunge in equities. Citigroup Inc. has forecast a slump of as much as 50 per cent in the Pakistani key index.

"Now all depends on the court decision," said Sa'ad Bin Ahmad, research analyst at Capital One Equities Ltd. "The outcome of the decision will set the market direction."

Oil & Gas Development Co. (OGDC PA), the largest explorer in the South Asian nation, fell 5 per cent, the daily limit.

Pakistan Telecommunication Company Ltd. (PTC PA), the biggest telecom service provider, declined 5 percent.

National Bank of Pakistan (NBP PA), the nation's biggest lender by assets, dropped 5 per cent.

The stock-market regulator has kept a rule preventing the gauge from falling more than 5 per cent.

Political wrangling

Stocks plunged this year after the Pakistan Peoples Party- led coalition government, which took charge in March, was caught up in political wrangling for six months over how to remove former President Pervez Musharraf. Musharraf resigned on August 18 to avoid facing impeachment charges.

The political uncertainty distracted the government from reviving an economy growing at the slowest pace since 2003.

Investors' concerns were also exacerbated as the global credit freeze sent the rupee to a record low, the balance-of-payments deficit expanded to its widest level ever and inflation accelerated to a 30-year high.