Investors turn violent
Two people were slightly injured with glass splinters flying all over. The bourse management called in police and Rangers were also at the scene for a brief period, but the law-enforcement personnel stopped short of using force as the crowd dispersed after over an hour of violent protest.
Investors at the Islamabad and Lahore stock exchanges also went on the rampage, chanting slogans, pelting stones and lighting bonfire. The protesters demanded the end to ‘lower locks’, which they said had greatly eroded the value of their investments.
The investors’ frustration gave way to rioting as they watched the KSE-100 index on an unstoppable downward drift for 16 trading sessions in a row.
The market opened on Thursday with a massive 400 points decline in the KSE-100 index, adding to the earlier loss of 5,200 points that the market has seen in three months since the current meltdown began on April 18. Overall, the index has slipped by 35 per cent, but some of the individual stocks have shed as much as 50 to 70 per cent of their value. “I had invested Rs 2 million in blue chip stocks and almost half of it has been washed away,” said an agitated investor in the mob. But of greater concern to the small investor was the early clamp of ‘lower locks’, which blocked investor exit. ‘Upper and lower locks’ are the market mechanism which allows a maximum of five per cent gain or loss in the value of a stock during a single day. The long lingering phenomenon of ‘lower locks’ just at the commencement of the trading in the morning precluded any attempt by an investor to seek an exit from the market, even after taking the loss. A stock broker who asked not to be named said that the SECP had sliced the daily decline from 5 to 1 per cent for 15 days from June 28 to July 15, but that offered little solace to the small investors, many of whom were found on Thursday accusing the regulator of colluding with big brokers in the change of ‘overnight rules’.
Investors were peeved at the fact that the government had distanced itself from the market situation and the financial institutions were unwilling to come to the rescue. But a fund manager said: “Financial institutions invest in equities to make profit and it is not their function to bail out the market.” Most market participants blamed the current uncertain political situation and deteriorating economic indicators for the incessant bear run. “Foreign investors have already fled for safer havens and even otherwise equity markets worldwide are taking the beating”, said an analyst.
While the apex regulator, the SECP, held itself quiet during the day, an emergent general body meeting of stock brokers was held at the KSE in the afternoon, where the fraternity put forward various views. A suggestion to close down the market for a ‘cooling period’ was turned down by those presiding over the meeting.
But late into the evening some of the directors on the board and a couple of big players were huddled together in a room at the KSE deliberating on ways to ease investors out of the situation. Sources said that five or six big brokers were in discussion to form a private fund of a small amount which could provide respite to the market. The suggestion could not, however, be independently confirmed.
“It is a difficult situation, but given patience we will be able to resolve the issue,” said a stock broker who was in the forefront of pacifying the agitated crowd of investors in the morning.