Karachi - Pakistan's Karachi Stock Exchange on Tuesday banned short-selling in all stocks following Moody's down-grading of the country's credit rating, traders said.

The ban on short-selling follows similar moves this week by Wall Street and other top international markets to avoid dangerous speculation in tumultuous economic times.

The Karachi bourse, which is already virtually at a standstill, is expected to lift the cap by early next month.

But before doing that its board of directors slapped new trading curbs to stop a further slide upon news that Moody's Investor Service, an international credit rating agency, reduced the outlook for Pakistani debt to negative.

On Monday Pakistani banks decided to set up and up to 30-billion-rupee (350-million-US-dollar) fund to support the country's biggest market.

"Initially it is expected to be 20 billion rupees (around 250 million dollars) and later the fund may be raised up to 30 billion rupees," said Munir Ladha, director of Karachi Stock Exchange.

The fund will be sponsored by the central State Bank of Pakistan.

The ailing Pakistani market has lost almost 50 per cent of its value since January amid the chaotic political and economic situation and a spate of deadly suicide bombings.

The foreign exchange reserves with the central bank have halved during the last nine months. (dpa)