The Karachi Stock Exchange, Asia's cheapest equity market, plans to ease trading limits this year to avoid a repeat of curbs that froze equity markets for four months and drove out overseas investors, Bloomberg reported.
Pakistan's biggest exchange may triple the current 5 percent limit that a stock can decline each day and introduce so-called circuit breakers that limit how much the entire market can fall, Adnan Afridi, managing director, said in an interview in Karachi.
"Our circuit breakers are a bit narrow by international standards," Afridi said late yesterday. "We are looking at a combination of having wider circuit breakers, maybe 10 or 15 percent, and then having market halts, of say, 3 to 5 percent."
Pakistan is seeking to boost investment in shares after its benchmark index declined 58 percent in 2008, the most in 18 years, because of political instability and an economic slowdown. Freeing up trading limits would attract more investors, said Tariq Iqbal Khan, chairman of Pakistan's biggest money manager.
"If a stock has to fall 15 percent, it will either fall in one day or three days, the stocks have to come down to natural price," said Khan, who manages the equivalent of $940 million in equities at National Investment Trust Ltd. in Karachi. "Nobody wants to trade in a value he feels is not realistic."
The proposed market halts could stop trading for 30 minutes if the index rises or declines by a certain proportion, Afridi said. "We are studying different models," he said.
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