KARACHI, Oct 26: The ‘floor’ at the Karachi Stock Exchange, which was due to be removed on Monday, would stay put until funds are in place, the managing director of the KSE told a hurriedly called press briefing on Sunday evening.

Adnan Afridi was probably echoing the decisions of the board of directors of the KSE, apex regulator SECP, the State Bank and financial institutions made over the past week.

The adviser to the prime minister on finance, Shaukat Tareen, had earlier announced the creation of a market stabilisation fund of Rs 20 billion, expected to be funded in equal proportion by EOBI, State Life, NIT and NBP. The package was aimed at bailing out leveraged investors in nine government-controlled entities.

Mr Tareen had also announced a ‘put option’ of Rs 30 billion as cushion for foreign investors in an attempt to discourage them from flying away with US$450 million of their investment in equities as soon as the ‘floor’ was removed.

Foreigners had taken a heavier beating than locals because of the huge loss of rupee value against the dollar. But until Saturday, neither the promised funds were in sight nor the ‘put option’.

The KSE MD said in his briefing that the government had approved the ‘put option’ and cash component. Only modalities remained to be decided. Mr Afridi stated that paperwork for the Rs 50 billion package was ready and a mechanism was awaiting to be put in place.

Early on Sunday, panic gripped most brokers as they feared a steep fall of 20 per cent in equity values, which together with plunge of a 42 per cent in stock prices since April, would have caused insurmountable loss to investors in case the ‘floor’ were removed on Monday.

Since Mr Tareen had already expressed his displeasure over the ‘floor’ and advocated free movement, a section of the broker fraternity reached out to other quarters.The seriousness of the situation dawned upon the government after the chief of MQM, Altaf Hussain, appeared to have put his weight behind brokers on Saturday by setting up a committee of seven Muttahida members and went on to address by telephone a gathering at the residence of broker Aqeel Karim Dhedhi.

Mr Hussain, who also got in touch with the president, the prime minister and the adviser on finance, said his party was aware of market issues “The KSE will not go bankrupt, ” he declared.

President Asif Zardari also stressed the need to solve problems of market on a priority basis, saying that interest of small investors be protected.

In Islamabad, Mr.Zardari held meetings with the State Bank governor.

In his press briefing, the KSE MD gave no new date for the removal of the ‘floor’, which was placed under the KSE-100 index on Aug 28 to prevent it from falling below the level of 9,144 points. But brokers and traders thought that short of dollars, the government would be inclined to keep plug on the feared exit of foreigners, until the expected inflows of funds from “Friends of

Pakistan” or a bailout package from IMF materialises by middle of next month.

Mr Tareen is scheduled to visit the KSE on Oct 31.