Agence France Press

Karachi, March 25:

Paramilitary troops and police guarded Pakistan’s main stock market on Friday as officials investigated an alarming stock market slump that led to a riot by angry shareholders. The country’s shares watchdog and officials at the Karachi Stock Exchange, or KSE, said they were probing the possibility of irregularities or manipulation by big brokerage houses. Hundreds of shareholders threw stones and smashed up cars on Thursday after the exchange prevented them from selling their lossmaking holdings for a sixth consecutive day. Five people were arrested. Armed rangers and police were searching people and checking their identity cards as they entered the Karachi exchange, witnesses and police said, while four mobile police vans were stationed outside the building. The KSE-100 index of blue-chip shares reached an all-time high of 10,304.72 points on March 15 but continued to fall Friday to 7940 points at a pre-lunch break.

Pakistan’s Securities and Exchange Commission has brought in a string of reforms in recent years to check possible insider trading and market manipulation by big brokerage houses.

After susutained fears over the last few days that economic fundamentals that did not justify recent stock market gains the watchdog launched a probe, its chairman Tariq Hasan told AFP without divulging the findings. “We had sent a team of our experts to Karachi but this is a routine practice of ours as a regulator to check abnormal activities at the bourse,” he said.

Karachi Stock Exchange managing director Moin Fudda told AFP that initial investigations showed the market was being manipulated by “someone big” so they could buy shares cheaply from desperate smallholders. He did not elaborate.

“Reforms have largely checked the chances of manipulations and it is not being done at the levels of say 10 years ago, but there is still room for further improvement,” said Mohammad Sohail, director of Jahangir Siddiqui Capital Markets Ltd. Dealers had said last week that the breaking of the 10,000 point barrier marked a historic recovery for the KSE, which hit a low of 1,401 points on March 15, 2001. But the rapid rise of stocks in recent weeks prompted fears of a crash.