Pakistan stocks tumble in the wake of Bhutto killing

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The Karachi Stock Exchange 100-share index fell by the 5% limit allowed under trading rules, shedding 689.72 points to 14,082.36. However, the market is up by 40% over the past 12 months.

Bhutto was assassinated on Thursday ahead of elections scheduled for 8 January, and the market was closed on Friday because of the killing.

Karachi, Pakistan's financial capital and main port, has been paralysed by street violence. Shops and petrol stations have been closed and railways attacked by angry mobs, sending shivers through investors.

In neighbouring India, shares shook off the crisis with the benchmark Sensex index virtually unchanged. It has risen 47% in 2007.

London traders pointed out that the Pakistan economy was not a big enough force to have a major impact on global markets, so today's slide there should not be taken as setting the tone for 2008.

While the unrest caused by Bhutto's killing will dampen foreign investor sentiment, most observers believe that solid fundamentals will help the Pakistan markets to cope.

"In the near term, we will see a knee-jerk reaction in the stock, currency and bond markets as people conjure up extreme situations of civil war or an Iran-like theocratic regime," said Agost Benard at Standard & Poor's.

Bhutto's party appointed her son and her husband to succeed the opposition leader, but uncertainty is likely to remain for some time. Traders are bracing for further economic fallout from the deepest crisis in Pakistan's 60-year history.