Pakistan's stock market has fallen by more than 4% after a bomb attack on the head office of the Pakistan State Oil (PSO) company.

At least one person has been killed and two more wounded by the explosion outside the PSO building in Karachi.

It is not yet clear if the company was the intended target of the attack.

The Karachi stock exchange 100-share index dropped 106.13 points, or 4.175 to 2,438.9 by 0735 GMT.

After being one of the best performing markets in 2002, gaining 114%, the Karachi index has slumped more than 18% since hitting an all-time high of 2991.3 on 16 January.

Uncertainty caused by threats of a US war against Iraq and the high level of domestic interest rates has put off investors.

Privatisation plans

The government has listed PSO as one of its main privatisation targets but progress has been stalled.

Last week a meeting with potential bidders for a controlling 51% stake in the company was put off.

The Pakistan Privatisation Commission said the meeting would now be held on 19 February.

Representatives of the state-run Kuwait Petroleum Corporation, Saudi Arabian group MIDROC and Pakistan's Fauji Foundation took part in a meeting in November.

Karachi's troubles

Karachi has recently been the scene of a series of bombings and other attacks, which last year left 37 dead.

Last May a suicide bomber killed 11 French engineers - who had been helping the Navy build its submarines - and two Pakistanis.

In June, a car bomb at the US consulate in Karachi killed 12 and injured 50.

Karachi is an important commercial port on the southern coast with a population of 14 million.