KARACHI, June 24: Shares at the Karachi Stock Exchange (KSE) rallied on Tuesday to propel the KSE-100 index by a historic high of 960 points. The sudden turn of tide, after an incessant fall of 4,500 points since April 18, has nonetheless raised many an eyebrow.

The trigger that sent the index through the roof, in the opinion of insiders, was a change of trading rules, termed ‘market stabilization measures’, announced by the Securities and Exchange Commission after a meeting with the board of directors of the KSE late on Monday evening.

“Investors read with disbelief in Tuesday’s newspapers about the sudden changes in the limits placed on how high or low the price of a scrip could go in a single trading session and the ban on short sale,” a stock trader said.

According to the rules in force till Monday evening, the maximum and minimum rise and fall allowed in the price of a stock — called “circuit breakers” in market jargon — were five per cent of its value.

But the SECP, through the Monday amendment made after the meeting with KSE bosses, slashed the lower ‘circuit breaker’ to one per cent from five per cent and doubled the maximum limit from five to 10 per cent.

A trader explained: “It means that after the amendment a Rs 100 stock (which could gain or lose Rs 5 in a single trading session before the change), was restricted to a fall of Re 1. On the other hand, the maximum permissible increase was doubled from Rs 5 to Rs 10.”

Most small investors were sore. “It is now a win-win situation for those who were able to ride out the two-month old bear market,” said one such investor.

A broker having modest means alleged that the new rules had been engineered to facilitate major players. “Speculators who buy on borrowed money are blamed for their losses when the market goes down,” said a bank employee, who traded in shares on the side and had lost Rs 2 million over the past two months.

“How could even a genuine small investor who had taken delivery of shares by paying from his pocket hold on that long (two months) in a fast falling market,” wondered the crestfallen investor.

The market was abuzz with allegations and suspicions that after the last of the small investor had fallen, the vultures had gone for the kill.

“Now facilitated by the market stabilisation measures, the individuals with deep pockets would be able to lick the stocks at attractively low levels,” said a trader, boiling over with venom.

The market was littered with corpses of uncountable small investors who had been ruined. Most of them saw the timing of the announcement of stabilisation measures with suspicion.

“Why didn’t the front line regulator (KSE) and the apex regulator (SECP) move earlier to stem the rot, which was going on since April 18,” wondered one angry man.

A small broker also questioned the announcement of placing a ban on short sale since those who may have rolled over into July contract would have gone to make huge losses. “If at all the ban were to be imposed, the announcement could have come on Saturday, so that those who entered on Monday were not trapped.”

Another small fry objected to the participation of member directors in the deliberations pertaining to market working, describing it as ‘conflict of interest’.

Evidently no one can prove any wrongdoing. But at the pace of progress on Tuesday (with the upper circuit breaker surprisingly doubled to 10 per cent), the market might be able to recover all of the two-month old loss in fewer than five sessions.

That the small investors would be left bruised and maimed, had put another question mark on the way the equity markets function, said an analyst. “I am troubled also by the way foreign investors would look at the sudden and unexpected overnight change in major rules,” a fund manager feared.

“It looks like the regulators will have to do a lot of explaining.”