QUETTA, Pakistan -
Pakistan stock markets, which tumbled in the wake of the assassination of former prime minister Benazir Bhutto, staged a dramatic recovery when markets reopened after being closed in the aftermath of the killing, signaling continued faith in an economy that has been growing at a 6.5% pace over the past four years.
The assassination of Bhutto on December 27, by a suicide assailant at a rally in Rawalpindi, subsequent outbreaks of violence across the country and doubt over the prospects of
general elections scheduled for January 8 encouraged investors to dump stocks when the markets opened on Monday, December 31, driving down the benchmark Karachi Stock Exchange (KSE) 100 index to 13,335 from 14,772. The 10% fall wrote off 400 billion rupees (US$6.4 billion) in market capital.
A speech by Pakistani President Pervez Musharraf speech and a return of relative calm has since lured the bulls back to the market. The KSE-100 recovered to 14,259 at the close on Friday, January 4, boosted by heavy buying the day for a record single day gain of 643.04 points, or 4.82%. The recovery continued into this week, with the index up more than 1% on Tuesday at around the 14,384 mark.
Banking stocks such as Arif Habib Bank, National Bank of Pakistan and Muslim Commercial Bank helped to power the recovery, with oil and gas shares also attracting interest as the international price of oil rose to $100 a barrel. OGDC, Pakistan Petroleum Limited and Pakistan Oilfields all picked up after sharing in the post-assassination sell-off.
Local analyst Ahsan Mehanti said: ''The snap recovery reflects that the basic market fundamentals are terribly bullish and no amount of negative external factors can keep it subdued for a long period.''
Commitments in a speech to the nation by President Musharraf that he would defuse tension after violence roiled the country in the wake of the assassination was one factor in restoring investor confidence. Also encouraging buying, the election commission announced on January 2 that the threatened general election would be held after all, albeit on February 18 rather than the scheduled January 9.
The following day, 215 billion rupees was added to market capital, pushing up the total to 4.265 trillion rupees, just short of the 4.5 trillion rupees reached before Bhutto's murder.
Relief that the elections were postponed rather than cancelled came after violence had erupted across the country, particularly in Sindh province, in reaction to Bhutto's death. Hundreds of vehicles, trains and public property, including Election Commission offices in many districts, were set on fire. At least 40 people lost their lives in rioting and burning, and the Federal Board of Revenue estimated a loss of 35 billion rupees to the economy due to the crisis.
The army was eventually called in to restore law and order, and President Musharraf announced that troops would stay in sensitive areas until law and order improved. He gave assurances that peaceful elections would be held on February 18 and that he would seek foreign assistance in investigating Bhuttos assassination.
As violence subsided, sentiment improved across the country's stock markets. The Lahore Stock Exchange LSE-25 index rose 2.73% to close on Friday at 4,545.71 with turnover of 31.17 million shares, up 8.34 million on the previous day. The Islamabad Stock Exchange ISE-10 index gained more than 2% to 2,956.87 on the same day, again amid higher turnover.
The earlier sell-off, which pulled down the KSE-100 index by a record one-day drop of 696.25 points on December 31, came amid fear that doubts over the country's political future and stability in the wake of Bhutto's death would lead to a massive outflow of foreign investment. Market analysts had expressed concern that if the situation led to prolonged deterioration, capital inflows from the Gulf, a substantial source of investment in Pakistans state assets and real estate, might also dry up and even be reversed, with money flowing out of the country into the Dubai market.
Strong corporate earnings and the country's continued economic growth had drawn investors to the country's stocks last year, with the KSE-100 Index gaining 38% in 2007, building on a 34% gain in 2006 and making it the best performer in Asia's emerging economies. The number of new company listings increased to 13 from nine a year earlier, raising 6.5 billion rupees in 2007 against 3.6 billion rupees in 2006.
Pakistan companies also raised a total of US$1.5 billion through global depository receipts of its three companies issued on the London Stock Exchange.
As the country's economy has grown - 7% in the fiscal year ended July 2007 - foreign direct investment in Pakistan has picked up, rising 67% to $1.87 billion in the first half of the 2006-07 fiscal year (June/July), led by inflows into the communications, oil and gas, and banking sectors.
Even so, risks to the economy are increasing, according to the State Bank of Pakistan (SBP). The country is expected to miss its 7.2% GDP growth target and annual inflation may rise to 7.5% in the financial year 2007-08. fueled by increased government borrowing. According to the SBP report, the current account deficit will remain high with the foreign exchange reserves under pressure.
Doubts also remain over the political direction of the country after the elections - assuming they are held as promised.
Asia Times Online
Syed Fazl-e-Haider, sfazlehaider05@yahoo.com, is a Quetta-based development analyst in Pakistan. He is the author of six books, including The Economic Development of Balochistan, published in May 2004.
Pakistan stock markets, which tumbled in the wake of the assassination of former prime minister Benazir Bhutto, staged a dramatic recovery when markets reopened after being closed in the aftermath of the killing, signaling continued faith in an economy that has been growing at a 6.5% pace over the past four years.
The assassination of Bhutto on December 27, by a suicide assailant at a rally in Rawalpindi, subsequent outbreaks of violence across the country and doubt over the prospects of
general elections scheduled for January 8 encouraged investors to dump stocks when the markets opened on Monday, December 31, driving down the benchmark Karachi Stock Exchange (KSE) 100 index to 13,335 from 14,772. The 10% fall wrote off 400 billion rupees (US$6.4 billion) in market capital.
A speech by Pakistani President Pervez Musharraf speech and a return of relative calm has since lured the bulls back to the market. The KSE-100 recovered to 14,259 at the close on Friday, January 4, boosted by heavy buying the day for a record single day gain of 643.04 points, or 4.82%. The recovery continued into this week, with the index up more than 1% on Tuesday at around the 14,384 mark.
Banking stocks such as Arif Habib Bank, National Bank of Pakistan and Muslim Commercial Bank helped to power the recovery, with oil and gas shares also attracting interest as the international price of oil rose to $100 a barrel. OGDC, Pakistan Petroleum Limited and Pakistan Oilfields all picked up after sharing in the post-assassination sell-off.
Local analyst Ahsan Mehanti said: ''The snap recovery reflects that the basic market fundamentals are terribly bullish and no amount of negative external factors can keep it subdued for a long period.''
Commitments in a speech to the nation by President Musharraf that he would defuse tension after violence roiled the country in the wake of the assassination was one factor in restoring investor confidence. Also encouraging buying, the election commission announced on January 2 that the threatened general election would be held after all, albeit on February 18 rather than the scheduled January 9.
The following day, 215 billion rupees was added to market capital, pushing up the total to 4.265 trillion rupees, just short of the 4.5 trillion rupees reached before Bhutto's murder.
Relief that the elections were postponed rather than cancelled came after violence had erupted across the country, particularly in Sindh province, in reaction to Bhutto's death. Hundreds of vehicles, trains and public property, including Election Commission offices in many districts, were set on fire. At least 40 people lost their lives in rioting and burning, and the Federal Board of Revenue estimated a loss of 35 billion rupees to the economy due to the crisis.
The army was eventually called in to restore law and order, and President Musharraf announced that troops would stay in sensitive areas until law and order improved. He gave assurances that peaceful elections would be held on February 18 and that he would seek foreign assistance in investigating Bhuttos assassination.
As violence subsided, sentiment improved across the country's stock markets. The Lahore Stock Exchange LSE-25 index rose 2.73% to close on Friday at 4,545.71 with turnover of 31.17 million shares, up 8.34 million on the previous day. The Islamabad Stock Exchange ISE-10 index gained more than 2% to 2,956.87 on the same day, again amid higher turnover.
The earlier sell-off, which pulled down the KSE-100 index by a record one-day drop of 696.25 points on December 31, came amid fear that doubts over the country's political future and stability in the wake of Bhutto's death would lead to a massive outflow of foreign investment. Market analysts had expressed concern that if the situation led to prolonged deterioration, capital inflows from the Gulf, a substantial source of investment in Pakistans state assets and real estate, might also dry up and even be reversed, with money flowing out of the country into the Dubai market.
Strong corporate earnings and the country's continued economic growth had drawn investors to the country's stocks last year, with the KSE-100 Index gaining 38% in 2007, building on a 34% gain in 2006 and making it the best performer in Asia's emerging economies. The number of new company listings increased to 13 from nine a year earlier, raising 6.5 billion rupees in 2007 against 3.6 billion rupees in 2006.
Pakistan companies also raised a total of US$1.5 billion through global depository receipts of its three companies issued on the London Stock Exchange.
As the country's economy has grown - 7% in the fiscal year ended July 2007 - foreign direct investment in Pakistan has picked up, rising 67% to $1.87 billion in the first half of the 2006-07 fiscal year (June/July), led by inflows into the communications, oil and gas, and banking sectors.
Even so, risks to the economy are increasing, according to the State Bank of Pakistan (SBP). The country is expected to miss its 7.2% GDP growth target and annual inflation may rise to 7.5% in the financial year 2007-08. fueled by increased government borrowing. According to the SBP report, the current account deficit will remain high with the foreign exchange reserves under pressure.
Doubts also remain over the political direction of the country after the elections - assuming they are held as promised.
Asia Times Online
Syed Fazl-e-Haider, sfazlehaider05@yahoo.com, is a Quetta-based development analyst in Pakistan. He is the author of six books, including The Economic Development of Balochistan, published in May 2004.
