KARACHI: The stock market faced a bloodbath on Monday as the KSE-100 index recorded massive loss of 1,030.79 points, or 3.44pc, the biggest one-day decline in recent history. The index settled at 28,927.

During the day Rs204 billion evaporated from the market capitalisation. With red splashed all across the trading board, more than 140 stocks hit their ‘lower locks’.

“Speculation of margin selling, unsettled futures settlement and local funds’ redemptions triggered panic selling,” said a broker who asked not to be named.

From its peak in February, the benchmark index has already lost 17pc while Rs1.4tr has been eroded from the index market capitalisation. Managing Director, KSE Nadeem Naqvi told Dawn on Monday that there were no defaults either at the client or the clearing house level and risk management systems were in place.

Following persistent sell-off by foreign investors, which this year to date amounts to $125.29m, the fear of flight of foreign capital took hold of investor sentiments, triggering panic selling.
He thought that market was driven by ‘sentiments’ rather than fundamentals which seemed strong. Independent enquiries also suggested that none of the brokers had gone broke, though there had been margin calls which forced weak holders to unwind their long positions.

Several brokers tried to calm the market and their efforts were met with support by an unexpected net foreign buying of $6.1m on Monday.

“Enforcement of client asset segregation by KSE has been taken negatively by brokers,” a person close to the apex regulator said, mentioning one of the reasons. He added: “The quantum of this issue is Rs5bn. KSE has informed concerned members to rectify this anomaly by June 30.”

Another investment analyst observed that the reasons for the heavy fall included local mutual funds facing redemptions, unbridled foreign selling and large futures positions from the March contract being unable to shift completely to the next contract and hence being forced to sell off in the normal market.

But a senior broker said that the fate of the future contracts would be clear on Tuesday.

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