KARACHI (Reuters) - Pakistan’s share market slumped on Monday in its first reaction to the assassination of former prime minister Benazir Bhutto whose death plunged the country into one of its deepest crises.
In early trade, the benchmark Karachi Stock Exchange 100-share index fell 4.6 percent, the biggest percentage fall in 18 months and close to the market’s limit of 5 percent.
“There are no buyers in the market, only sellers,” said Shuja Rizvi, director of broking at Capital One Equities.
“Every stock on my screen is limit-down.”
Under market rules designed to prevent panic selling, the index cannot move by more than 5 percent in a day.
Bhutto was killed in a gun-and-bomb attack on Thursday ahead of elections scheduled for Jan. 8, throwing into doubt a smooth transition to civilian-led democracy after almost a decade of military-backed government under President Pervez Musharraf.
The killing unleashed a wave of violence, especially in southern Sindh province, Bhutto’s political stronghold and home to the country’s biggest city and financial capital, Karachi.
Mobs angry at her death torched vehicles and railway stations, prompting police to adopt a shoot-on-sight policy. The violence and security crackdown paralysed the country.
The market was shut on Friday because of the assassination.
On Monday, as Karachi and other major cities began to return to life, sellers stormed the market, pushing the market to a low of 14,086.79 points. The wider market has not fallen 5 percent since June 14, 2006. Turnover was thin at 18 million shares.
The Pakistan rupee, managed closely by the central bank, also weakened 0.6 percent under the weight of selling. It was bid at 61.73 rupees in morning trade compared with 61.38 previously.
Dealers and fund managers said the sell-off was likely to be short term, provided the political situation did not worsen.
On Sunday, Bhutto’s Pakistan People’s Party chose her 19-year-old son Bilawal as her political heir and co-chairman of the party, along with her widower, Asif Ali Zardari. Many Pakistanis hope the succession will calm the party’s supporters.
“It was expected that there would be a negative reaction initially, but the People’s Party decision to contest in the upcoming elections is a good sign,” said Sajid Bhanji, a dealer at Arif Habib Securities Ltd.
“However a lot depends on now what decision the Election Commission takes and whether or not Pakistan’s credit ratings remain the same.”
Later on Monday, the Election Commission is to due to make a decision on the timing of the next election, currently scheduled for Jan. 8 but widely expected to be postponed.
“There could be short-term volatility of flows but not long-lasting,” said Mark Mobius, who oversees $45 billion at Templeton AssetManagement Ltd including Pakistani stocks.
He said he still had a positive outlook for the market and believed that the problems would be solved, though the biggest risk was “a breakdown of law and order entirely”.