'Heightened risk' results in shares slumping 5%

Karachi: Pakistani shares slumped five per cent yesterday in their biggest one-day drop for 16 months, as investors reacted to emergency rule imposed by President Musharraf on Saturday.

Investors in Pakistan's foreign currency debt pulled down credit default swaps - insurance-like contracts that protect against debt defaults and restructuring - citing the heightened risk perception after emergency rule was introduced.

"I think any long term investment, and any sort of clean and productive money is not going to come in now," said Asad Saeed, a Karachi-based independent economist.

The Karachi Stock Exchange benchmark 100-share index ended down 4.6 per cent at 13,279.60 points - its biggest single-day loss since June 14, 2006. Turnover was more than 176 million shares. The free-float KSE-30 index fell 4.9 per cent.

The main index has soared more than 1,000 per cent since the end of 2001, and last month hit a record 14,908.91, taking its market capitalisation to around $70 billion (Dh256.9 billion), still just a fraction of neighbouring India's $673 billion.

The sell-off reflected the changing fortunes for Musharraf, whose liberal policies, loved by investors at home and abroad, had helped the economy grow at an average 7 per cent in the last four years amid record investments.

Concern: Credit rating agency lowered its outlook

Standard & Poor's lowered its outlook on Pakistan's B-plus rating to stable from positive in July, citing concerns about the country's deteriorating security environment and the risk of potential fiscal slippage.

Although Pakistan's foreign currency bonds were not traded, Singapore traders said there was a steady quote of 90/92 cents to a dollar for the country's 2017 bonds.

"Going back to democracy will take time now. The political landscape is now a lot more uncertain than before," said Hong Kong-based HSBC credit analyst Dilip Shahani, who downgraded Pakistan's 2017 and 2036 bonds to underweight from neutral.