Karachi bourse witnesses bullish trading

ISLAMABAD, Jan 18: Financial investors appear to be returning to Pakistan, analysts said Tuesday citing a 17 per cent surge in the Karachi Stock Exchange in six straight days of bullish trading, says AP.

They say investors are optimistic that Pakistan's new military rulers will make good on their promise to revive the country's ailing economy.

Since Gen Pervez Musharraf threw out the elected government on Oct 12, Pakistan's Karachi Stock Exchange has climbed 404 points or 32 per cent.

On Monday, the index surged 35.23 points to 1,661.33 in a record turnover of 462 million shares. Analysts expect the market to hold steady.

"Hitting the 2000-point mark is the target in the year 2000," Hasan Dawar, a broker at the Global Securities, told The Associated Press."

The Karachi index slumped to an all time low of 765.74 points on July 14, 1998. The drop was in response to Pakistan's underground nuclear explosions in May 1998. The explosions followed similar tests by India. Several countries, including the United States, were quick to impose economic sanctions on the two countries.

India with its robust economy shrugged off the impact of sanctions, but Pakistan, which is dependent on foreign aid and loans to keep its economy afloat, was pushed to the brink of a default on its foreign debt of $32 billion.

Sanctions were eased and the International Monetary Fund provided a dlrs 1.6 billion bailout package to Pakistan and donor nations and commercial banks rescheduled more than $3.3 billion.

The chairman of the Karachi Stock Exchange, Arif Habib, said the rally has been driven by local investors and institutions.

"After the nuclear tests, most foreign investors got out of our market, he said. "Once confidence is restored, they will come back as Pakistani stocks are at attractive levels, compared to other regional markets."

Investors are optimistic because blue chip companies have had a good showing. He said they are also hopeful that state-run institutions will be privatised, that the agricultural crop will be a good one and the textile sector will turnaround.

"The market will move in a band of 1,550 to 1,800 points in the coming months which is a healthy sign compared to low levels it slumped in 1998," he said.

Dawar said the most noticeable shift in the investment climate has come with the military takeover.

"Sentiment has changed since the military takeover. The new government seems serious in sorting out the issues which have plagued our economy," he said.

Musharraf has put reviving the economy and cleaning up corruption in the public service his top priorities.

The government has also pledged to settle its tariff disputes with private power companies and in particular the Hub Power Co. The dispute which raged during deposed premier Nawaz Sharif's term in power accused the power companies of charging inflated rates.

Dawar said Pakistani stocks were grossly undervalued because investors, nervous about investing in Pakistan, were selling off their shares. That appears to have changed with army rule.

Analysts also say reduced interest rates have contributed to a surge in the stock market.

"The market is flooded with liquidity," Dawar said. "Investors are turning toward stocks for quick returns because rate of profit in government investment schemes has gone down."