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Pakistan's MQM party leader Altaf Hussain held in London

The powerful exiled leader of Pakistan's MQM party, Altaf Hussain, was arrested in London on Tuesday on suspicion of money-laundering, his party said, as panic spread through his home city Karachi and protesters torched vehicles.

KARACHI: The powerful exiled leader of Pakistan's MQM party, Altaf Hussain, was arrested in London on Tuesday on suspicion of money-laundering, his party said, as panic spread through his home city Karachi and protesters torched vehicles.

The Muttahida Qaumi Movement (MQM) has its power base in the violence-racked city, Pakistan's largest, which it controls with an iron fist.

Hussain's arrest, confirmed by MQM officials in London, sparked fears of a violent backlash there.

British police said only that a 60-year-old man whom they did not name had been detained at a residential address in northwest London on suspicion of money-laundering. It said officers were searching the building.

Hussain wields effective control over Karachi from his London suburb, addressing supporters through a loudspeaker linked to a phone.

Panic gripped the sprawling metropolis of 18 million soon after local television broadcast the news. Angry protesters torched at least a dozen vehicles, according to rescue officials.

Many rushed to stock up on groceries in anticipation of a prolonged shutdown while office workers left for home early, clogging up roads.

"We don't know for how long the shops will remain closed and I want to store as much groceries as I could," Razia Begum, 45, said as she jostled for space in a packed shop.

A spokesman for Pakistan Railways told AFP that all trains leaving Karachi had been temporarily halted.

The MQM's parliamentary leader inside Pakistan appealed to party workers to remain calm and pray for Hussain.

"We should stay calm, we should not become impatient in any condition. The workers must be aware of developments, keep in touch with the party office, stay united and also look around you," said Dr Farooq Sattar.

"We should act on the teachings of Altaf Hussain. We should pray for his health, we should say that he should be given medical treatment and his medical tests should be conducted," he added.

British officials said they had temporarily closed their deputy high commission in the city, as Karachi police strengthened security in the city's diplomatic enclave.

"We have tightened the security of the consulates, especially of the British," said city police chief Ghulam Qadir Thebo.

The Karachi Stock Exchange plunged three percent on the news, from 29,784 points to 29,009 points.

Karachi is Pakistan's economic heart but is frequently rocked by ethnic, sectarian and militant violence and has one of the world's highest murder rates.

Unlike Pakistan's other major political leaders who are largely drawn from the elite, Hussain was born to a lower middle class family that migrated from Agra in India during partition in 1947.

He founded the MQM party in 1984 to safeguard the rights of the city's Urdu-speaking community which fled from India. Many of them revere him for bringing them relative prosperity after the turbulent ethnic clashes of the 1980s.

But critics accuse the party of resorting to extortion and violence to maintain its grip on power.

Hussain left Pakistan for Britain in 1992 after a military operation to end ethnic unrest in Karachi, gaining British citizenship in 2002.

His residence in London was raided on suspicion of money-laundering in 2012 and 2013 by British police.

In 2010 the murder in London of Imran Farooq, one of the party's founding members and a confidante of Hussain, sparked speculation of an "inside job -- charges strongly denied by the MQM.

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