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Bussiness stopped!!! plitical stablity reached 0 in Pakistan,
The assassination of Pakistani opposition leader Benazir Bhutto will likely rattle the country's equity markets, eroding confidence at least in the short term in a market that's been one of the best performers in Asia, observers said.
Bhutto, a former prime minister of Pakistan, was killed Thursday in an attack that also killed at least 20 others at the end of a political rally in Rawalpindi. Read full story.
World leaders condemned the assassination, which sent shock waves through the Pakistani political system ahead of Jan. 8 parliamentary elections. It immediately raised questions about whether the elections would proceed on schedule and whether President Pervez Musharraf would reimpose a recently lifted state of emergency.
'The big takeaway from this horrible event is that Pakistan could slide into a civil war of sorts.'
— Win Thin, Brown Brothers Harriman
News of the assassination left U.S. financial markets unsettled, with the Dow Jones Industrial Average ($INDU:
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Last: 13,359.61-192.08-1.42%4:03pm 12/27/2007Delayed quote data
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$INDU 13,359.61, -192.08, -1.4%) falling more than 100 points. Crude-oil and gold futures rallied, as did prices of U.S Treasurys. See Market Snapshot. See Futures Movers.
Bhutto's death will likely also destabilize Pakistan's equity market, among the best-performing bourses in the region.
"In the very short term, there will be a knee-jerk reaction as you saw at the time of the imposition of the rule of emergency by Musharraf earlier this year," said Rupert Neil Bumfrey, an advisor to emerging markets asset-management companies, in a phone interview from Dubai.
"Again, the knee-jerk reaction will be don't go Pakistan," said Bumfrey, who travels often to Pakistan. "However, as we've seen with the stock market since the imposition and abandonment of emergency rule, the stock market has continued to be positive. In the long run, Pakistan remains an excellent investment. It has good value."
In Karachi, the benchmark KSE-100 stock index closed down 0.3% on Thursday. See the Karachi Stock Exchange's Web site.
It has rallied 47% year to date. By comparison, India's Sensex index has gained 46.6% year to date.
Another key indicator showed a similar advance. The MSCI Pakistan index's year-to-date gain has been 40.7%, while MSCI India has surged 70% and MSCI China has rallied 65%.
"This is going to be the first big test of sentiment since fund managers started focusing on this market in the middle of last year," said Cameron Brandt, global markets analyst at EPFR Global.
Economic growth story
"Pakistan was on the front edge of the frontier market phenomenon -- the quest for untapped value in emerging markets," Brandt said. "Pakistan is on the front end of that because its economy has been doing reasonably well with almost no fanfare."
Indeed, Pakistan's gross domestic product has averaged 6.9% growth over the past five years.
That strong economic growth, however, might be overshadowed now that Bhutto's killing thrust the volatile region, which many observers consider a breeding ground for violent Islamic extremism, back into the global spotlight.
Pakistan, which borders Afghanistan, is the recipient of billions of dollars of U.S. aid and a key front in the U.S.-declared war on terrorism. The death of Bhutto, who was expected to be a force in Pakistani politics following the election, cast U.S. policy toward the region into turmoil.
"The big takeaway from this horrible event is that Pakistan could slide into a civil war of sorts," said Win Thin, senior currency strategist at Brown Brothers Harriman, in a research note. "Such a development would upset the delicate balance in the region. India, for instance, has benefited from improved relations with Pakistan under Musharraf."
Pakistan equities and rupee are likely to come under pressure when markets reopen, Thin said.
Investors with a long-term perspective and mettle, however, may well find lucrative opportunities in Pakistan.
After Egypt, Pakistan is one of the first emerging markets where Persian Gulf investors look to for opportunities, Brandt noted.
Echoing this, Bumfrey said that the United Arab Emirates and Saudi Arabia have been investing a lot of money in Pakistan.
"The biggest support for Pakistan will continue to come from this region," Bumfrey said. "New refineries are being financed by Abu Dhabi. All of that will continue."
Temasek, one of Singapore's sovereign wealth-management funds, for example, also has holdings in Pakistan, he said.
Under Musharraf, the Pakistani economy has boomed in comparison with its performance in the past. The government has introduced major macroeconomic reforms since 2000, such as privatization of the banking sector.
"But it is not India. India has surged well ahead," Bumfrey said.
For Pakistan to reach India's pace of growth, "you need the liquidity. You need the external international capital. There's offshore funds that are being crated now as we speak to garner that liquidity," he said.
Bumfrey conceded that Pakistan hasn't marketed itself very well: "The big problem is one of perception by the western world."
Goldman Sachs, which coined the BRIC term to refer to Brazil, Russia, India and China, has also come up with the term "Next 11."
The list of those eleven countries that have the potential to offer tremendous investment opportunities, akin to the BRIC countries, includes Pakistan, as well as Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, the Philippines, Turkey and Vietnam.
"It's a question of people getting the liquidity and investing," Bumfrey said. "They've got to be brave. Not everyone will want to invest in Pakistan, but not everyone wanted to invest in India [back in the early 1990s
The assassination of Pakistani opposition leader Benazir Bhutto will likely rattle the country's equity markets, eroding confidence at least in the short term in a market that's been one of the best performers in Asia, observers said.
Bhutto, a former prime minister of Pakistan, was killed Thursday in an attack that also killed at least 20 others at the end of a political rally in Rawalpindi. Read full story.
World leaders condemned the assassination, which sent shock waves through the Pakistani political system ahead of Jan. 8 parliamentary elections. It immediately raised questions about whether the elections would proceed on schedule and whether President Pervez Musharraf would reimpose a recently lifted state of emergency.
'The big takeaway from this horrible event is that Pakistan could slide into a civil war of sorts.'
— Win Thin, Brown Brothers Harriman
News of the assassination left U.S. financial markets unsettled, with the Dow Jones Industrial Average ($INDU:
Dow Jones Industrial Average
News, chart, profile, more
Last: 13,359.61-192.08-1.42%4:03pm 12/27/2007Delayed quote data
Add to portfolioAnalyst Create alert
InsiderDiscussFinancials
Sponsored by:
$INDU 13,359.61, -192.08, -1.4%) falling more than 100 points. Crude-oil and gold futures rallied, as did prices of U.S Treasurys. See Market Snapshot. See Futures Movers.
Bhutto's death will likely also destabilize Pakistan's equity market, among the best-performing bourses in the region.
"In the very short term, there will be a knee-jerk reaction as you saw at the time of the imposition of the rule of emergency by Musharraf earlier this year," said Rupert Neil Bumfrey, an advisor to emerging markets asset-management companies, in a phone interview from Dubai.
"Again, the knee-jerk reaction will be don't go Pakistan," said Bumfrey, who travels often to Pakistan. "However, as we've seen with the stock market since the imposition and abandonment of emergency rule, the stock market has continued to be positive. In the long run, Pakistan remains an excellent investment. It has good value."
In Karachi, the benchmark KSE-100 stock index closed down 0.3% on Thursday. See the Karachi Stock Exchange's Web site.
It has rallied 47% year to date. By comparison, India's Sensex index has gained 46.6% year to date.
Another key indicator showed a similar advance. The MSCI Pakistan index's year-to-date gain has been 40.7%, while MSCI India has surged 70% and MSCI China has rallied 65%.
"This is going to be the first big test of sentiment since fund managers started focusing on this market in the middle of last year," said Cameron Brandt, global markets analyst at EPFR Global.
Economic growth story
"Pakistan was on the front edge of the frontier market phenomenon -- the quest for untapped value in emerging markets," Brandt said. "Pakistan is on the front end of that because its economy has been doing reasonably well with almost no fanfare."
Indeed, Pakistan's gross domestic product has averaged 6.9% growth over the past five years.
That strong economic growth, however, might be overshadowed now that Bhutto's killing thrust the volatile region, which many observers consider a breeding ground for violent Islamic extremism, back into the global spotlight.
Pakistan, which borders Afghanistan, is the recipient of billions of dollars of U.S. aid and a key front in the U.S.-declared war on terrorism. The death of Bhutto, who was expected to be a force in Pakistani politics following the election, cast U.S. policy toward the region into turmoil.
"The big takeaway from this horrible event is that Pakistan could slide into a civil war of sorts," said Win Thin, senior currency strategist at Brown Brothers Harriman, in a research note. "Such a development would upset the delicate balance in the region. India, for instance, has benefited from improved relations with Pakistan under Musharraf."
Pakistan equities and rupee are likely to come under pressure when markets reopen, Thin said.
Investors with a long-term perspective and mettle, however, may well find lucrative opportunities in Pakistan.
After Egypt, Pakistan is one of the first emerging markets where Persian Gulf investors look to for opportunities, Brandt noted.
Echoing this, Bumfrey said that the United Arab Emirates and Saudi Arabia have been investing a lot of money in Pakistan.
"The biggest support for Pakistan will continue to come from this region," Bumfrey said. "New refineries are being financed by Abu Dhabi. All of that will continue."
Temasek, one of Singapore's sovereign wealth-management funds, for example, also has holdings in Pakistan, he said.
Under Musharraf, the Pakistani economy has boomed in comparison with its performance in the past. The government has introduced major macroeconomic reforms since 2000, such as privatization of the banking sector.
"But it is not India. India has surged well ahead," Bumfrey said.
For Pakistan to reach India's pace of growth, "you need the liquidity. You need the external international capital. There's offshore funds that are being crated now as we speak to garner that liquidity," he said.
Bumfrey conceded that Pakistan hasn't marketed itself very well: "The big problem is one of perception by the western world."
Goldman Sachs, which coined the BRIC term to refer to Brazil, Russia, India and China, has also come up with the term "Next 11."
The list of those eleven countries that have the potential to offer tremendous investment opportunities, akin to the BRIC countries, includes Pakistan, as well as Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, the Philippines, Turkey and Vietnam.
"It's a question of people getting the liquidity and investing," Bumfrey said. "They've got to be brave. Not everyone will want to invest in Pakistan, but not everyone wanted to invest in India [back in the early 1990s
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