KARACHI, Oct 25: Two days before the proposed removal of the ‘floor’ from under the KSE-100 index, the Karachi Stock Exchange on Saturday was a picture of complete chaos and confusion. In an extraordinary development on Saturday, stock brokers reached out to the MQM chief, Altaf Hussain, in London.

Sources said the MQM immediately constituted a seven-member committee, with party leader Dr Farooq Sattar as its convener to help sort out the mess in the market.The high hopes of special trading session in the afternoon on Saturday to bail out leveraged players in selected stocks died down midnight Friday, when it was revealed that all or some of the four contributors (EOBI, NIT, State Life and NBP) of Rs5 billion each to the market stabilisation fund of Rs20 billion, pulled their pockets inside out.A trader said the session, in any case, was doomed for failure as institutions would have thought it imprudent to purchase the nine stocks on offer (Oil and Gas Development Company Ltd, Pakistan Petroleum Ltd, National Bank of Pakistan, Pakistan State Oil, Sui Southern Gas Company Ltd, Sui Northern Gas Company Ltd, Kot Addu Power Company Ltd, Pakistan Telecommunication Company Ltd and Habib Bank Ltd) at the offer price of 12.50 per cent discount to the ‘floor’ price, when in the ‘off-market transactions’, they could be bought at a deeper discount of 20 to 25 per cent.

The meeting of the boards of directors went into heated debate on two points: One, the postponement of removal of ‘floor’ for 15 days and the issue of ‘off-market transactions’.

The boards constituting five broker representatives and an equal number of directors appointed by the SECP could not reach a consensus view on the two issues. The SECP nominated directors were believed to have conceded to the member directors’ demand of extending the ‘floor’ until Nov 15, but were averse to putting a curb on ‘off-market transactions’.

A noisy meeting of the general body of some 90-strong KSE broker fraternity in the afternoon on Saturday poured their anger over the continuation of off-market transactions which, they thought, were being exploited by some brokers at the cost of generating negative sentiments about the market, by picking stocks at heavy discounts.

“In case our thoroughly legitimate demand falls on deaf ears, we will resort to strike,” said an angry member.

The KSE board is scheduled to meet again on Sunday at 5.30pm to try to find a solution to the intricate maze of problems. But most market participants ruled out the possibility of removal of ‘floor’, as was planned, on Monday.

“With the market still starved of liquidity, it will be suicidal to remove the floor,” said one senior broker. He said there was tangible fear of an outflow of at least $450 million from foreign equity portfolio, all at once as the planks are pulled from under the ‘floor’.

He said that economic managers understood that the country, already bleeding from depleting foreign exchange reserves, did not have that kind of money, until the funds had been lined up from the IMF early next month.

Advisor to Prime Minister on Finance Shaukat Tareen had time and again expressed his displeasure over the ‘floor’ at the KSE.

With both regulators, the SECP and KSE, avoiding making public statements which could keep investors informed, the confusion was being confounded.

“There are no easy solutions to the market problems and Pakistan’s equity markets are in turmoil like markets in the rest of the world, though entirely for different reasons,” an analyst said.