Business | Markets
Pakistan stocks, rupee rise on Musharraf resignation
Pakistan stocks and the rupee rose after President Pervez Musharraf resigned, ending a six-month standoff that had distracted the government from preventing an economic slowdown.
- Bloomberg
- Published: 14:45 August 18, 2008
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Musharraf resignation accepted
Pakistan's President Musharraf announces resignation
Islamabad: Pakistan stocks and the rupee rose after President Pervez Musharraf resigned, ending a six-month standoff that had distracted the government from preventing an economic slowdown.
The benchmark share index rose 4.5 per cent, the most in eight weeks, led by Oil & Gas Development Co. and MCB Bank Ltd. The rupee had its biggest advance in a month against the dollar, after Musharraf quit to avoid facing impeachment charges. Coalition government leaders said they plan to reinstate judges sacked by the president.
“Clearly we see this as a positive,'' said Thomas Harr, a senior currency strategist in Singapore at Standard Chartered Plc, a London-based bank that gets most of its profit in Asia. “There was political uncertainty and now you can say there's a little bit of clearance on that.''
The Karachi Stock Exchange 100 Index climbed 460.91 to close at 10,719.62. The rupee advanced 1.1 per cent to 75.5850 per dollar. Harr said the rupee may rise to 74.50.
“The country will try to get back on a complete democratic path,'' said Farhan Rizvi, an economist at JS Global Capital Ltd. in Karachi. “The government will focus on developmental issues. It will try to attract capital flows.''
The rupee may stabilise near 75 per dollar, stocks will rise and the yield premium for investing in the nation's debt will narrow, he said.
Credit-default swaps on Pakistan's government debt were last quoted at 740 basis points, unchanged from August 15, according to CMA Datavision's prices. The contract has risen from this year's low of 410 basis points recorded on April 28.
The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.
The contracts rise as perceptions of credit quality deteriorate. A basis point, or 0.01 percentage point, is worth $1,000 on a swap that protects $10 million of debt from default.
Oil & Gas, Pakistan's biggest petroleum explorer, rose by its 5 per cent daily limit to 118.68 rupees, its highest since July 22. MCB, the country's second-largest lender, gained by its 5 per cent limit to 303.71 rupees, the highest since July 10. Pakistan's currency, which has depreciated 22 per cent this year, snapped a six-day 5.5 per cent decline.
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