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Last Updated: Monday, 14 June, 2004, 13:37 GMT 14:37 UK
Angry scenes at Karachi bourse
A trader on the Karachi Stock Exchange
The tax has proved unpopular on the floor of the Karachi exchange
Traders have smashed windows at Pakistan's main stock exchange as part of an angry protest against a planned tax on share purchases.

The 0.1% tax, announced at the weekend in the government's annual budget, also pushed the main share index 3.1% lower by the close of trading on Monday.

The move has alarmed Pakistani investors, who do not currently pay tax on equity gains or stock purchases.

The country's equities industry has asked the government to reconsider.

Falling market

It is pushing for the government to either reduce the size of the levy, or to think of an alternative way of collecting revenues from the stock market.

The government has held talks on the issue with the Securities and Exchange Commission, Pakistan's financial markets regulator, but the outcome is not yet known.

Analysts said the tax threat was likely to weigh on share prices until the situation became clearer.

"As long as this uncertainty remains, the market will remain weak," said Asif Qureshi at Global Securities.

The Pakistani stock market has fallen steeply in recent weeks, shedding 4% since early May because of an upsurge in terrorist attacks and higher interest rates.

But it has ranked among the best-performing exchanges in the world over the last two years, boosted by a strengthening economy.

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