Why so many stocks close at exactly 10%
Pull up the day's biggest movers on the exchange and look at the percentages rather than the names. On most days a run of them sit at 10.02%, 10.01%, 10.00%, 10.00%, 9.99%. The decliners do the same thing in reverse.
Prices do not naturally pile up on a round number. Something is stopping them.
The scrip-level limit
Every share on the PSX has a daily price band. It may move up or down by 10% of the previous day's close, or by one rupee, whichever is larger. Hit the edge and it stops there for the rest of the session.
The one-rupee alternative exists for very cheap shares. On a stock trading at Rs 4, a 10% band would be forty paisa, which is narrow enough to freeze the stock on ordinary movement. The rupee floor gives those names room to breathe.
So the cluster at exactly ten is not a crowd of stocks that happened to rise by the same amount. It is a set of stocks that wanted to go further and were not allowed to.
The market-wide halt
There is a second brake above the first. If the KSE-30 moves 5% from the previous close and stays beyond that level for five minutes, trading halts across the whole exchange.
Note the five minutes. A brief spike does not trigger it. The rule is looking for a sustained move, on the theory that a panic which survives five minutes is a different creature from a bad print.
Note also that it watches the KSE-30 rather than the KSE-100. The narrower index holds the largest and most liquid names, which makes it harder to push around than a broader one.
Why the exchange bothers
The stated purpose is to interrupt disorderly trading and give participants time to reconsider before acting again. A forced pause is the crudest possible intervention, and it works for exactly that reason: it cannot be argued with.
Pakistan's own history with these limits is worth knowing. The band used to be 10%. During the crisis of 2008 it was cut, first to 7.5% and then to 5%, as the market fell day after day. Later the regulator approved widening it back out from 5% to 7.5%.
The band has been tightened when confidence collapsed and loosened when it returned. Which means the width of the circuit breaker is itself a statement by the regulator about how fragile it thinks the market is.
What this should change about how you read a movers list
A capped stock has not finished moving. A share sitting at +10.00% has run out of permission, not out of buyers. Tomorrow frequently continues it. A name at +3% has found a level; a name at the cap has found a wall.
The top of the list skews small. Thin, low-float shares reach the cap on modest volume. Large index constituents almost never do, because it takes real money to move them that far. So a movers table sorted purely by percentage tends to fill up with the smallest companies on the exchange and tell you very little about where the market actually went.
The index and the movers can disagree completely. A day where the KSE-100 finishes up half a percent can still show ten names limit-down. Different universes, different questions.
Volume is what separates them. A stock at the cap on a few thousand shares is noise. The same cap on several million is a decision by someone with size. The percentage column alone will not tell you which one you are looking at.
Sources
- Circuit breakers in PSX: why they matter and how they work, KASB
- Introduction of market halts and widening of circuit breakers, PSX
- New circuit breakers for PSX from next month, Dawn
- PSX set to increase stock price cap to 7.5%, The Express Tribune
- Circuit breaker, Pakistan stock market glossary, BSL