Page last updated at 11:06 GMT, Tuesday, 24 June 2008 12:06 UK

Pakistan acts to stem share fall

A Pakistani trader monitors shares' movements at the Karachi Stock Exchange
There are worries about the effectiveness of Pakistan's ruling government

Pakistan's main stock index has surged after its owner, the Karachi Stock Exchange (KSE), announced measures to stabilise the market.

The KSE's 100 share index gained 782.74 points, or 7%, to 11,944.91 after reaching a 15-month low on Monday.

A crisis of confidence in Pakistan's economy and uncertainty about its ruling party have hit shares recently.

The KSE said it would reduce the daily limit at which shares can fall to 1% for a month.

At the same time, it temporarily increased the limit at which shares could rise to 10%.

Previously, the trading band allowed for a 5% movement in either direction.


The exchange also banned "short selling" - essentially betting that shares will fall in value - for a month and said it would set up a 30bn rupee ($441m; 224,8m) fund to stabilise the market during periods of volatility.

"These measures did what was intended, and the market opened higher," said Asad Iqbal, managing director at Ismail Iqbal Securities Ltd.

But he said that the low volume of trades meant that investors were still cautious.

A growing company and consumer debt burden and surging inflation are to blame for the worries, analysts say.

Concern has also been fuelled by political infighting between the parties that make up the new coalition government over the reinstatement of judges sacked by President Pervez Musharraf.

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