Pakistan's largest bourse late Monday decided to unfreeze trading by October 27, a senior official told reporters.
Adnan Afridi, managing director of the Karachi Stock Exchange, said the decision was taken tentatively during three days of marathon meetings with the state watchdog Securities and Exchange Commission of Pakistan (SECP), reports dpa.
The Karachi Stock Exchange has been largely dormant since August 27, following the bourse's decision to freeze share prices at that day's levels. That meant trading could continue, but prices were not allowed to slip below that day's levels. The move was made to halt a prolonged decline.
The market has lost around 50 per cent of its value since May amid political instability and economic turmoil. Investors are concerned about the growing Islamic insurgency in the North West Frontier Province (NWFP), a spate of suicide bombings across the country and mounting tensions with NATO forces and the Afghan government.
The SECP was also at loggerheads with some top brokers recently who were demanding a complete closure for at least two weeks to consolidate losses.
Police were called on Monday to cordon off the market in order to prevent violence by angry investors and a group of aggrieved brokers.
A severe domestic liquidity crunch also sapped the appetite of domestic investors to buy back shares, leading the market interest rates on short-term borrowing to shoot up to a record average of 60 per cent.
"For borrowing loans for some companies' shares, the interest rate is up to 100 per cent," said a leading broker.
Market sources said the government had agreed to cap the interest rate at 24 per cent but there has been no official confirmation so far. A leading broker said a government announcement should come by Tuesday morning.
Meanwhile, Muddassar Malik, director of BMA Capital Management, one of Pakistan's top five brokerage houses, denied reports that he had said some stock brokers in the Pakistani market were on the verge of default.
Pakistan is currently facing inflation of more than 25 per cent and a widening current account deficit of over 14 billion dollars.
The country's currency has also depreciated by 22 per cent since January. Reserves with the central State Bank of Pakistan have been halved in six months to 8.3 billion dollars, barely enough to meet two months of imports.
Meanwhile, brokers mocked Sunday's statement by Finance Minister Shaukat Tarin of plans to launch a 10 billion dollar fund with the help of foreign investors and overseas Pakistanis at a time when the country's outlook is rated negative by both Moody's Investors Services and Standard & Poor.
The rumours last week of the country's default amid freezing of private bank accounts and lockers triggered a run on several banks.
"I think Mr Tarin's statement is very ambitious. It is a major concern how the government is going to raise funds," said Farhan Mehmoud, senior analyst at JS Global.
Already the prices of Pakistan's sovereign bonds on the London Stock Exchange has plummeted and is current trading near default levels.