Pakistan stocks surged the most in almost three years after the army agreed to mediate talks to resolve a political standoff caused by two weeks of protests seeking the resignation of Prime Minister Nawaz Sharif.
The KSE 100 Index jumped 2.9 percent to 28,567.74 at the close in Karachi. Oil & Gas Development Co., the nation’s biggest company by market value, climbed 3.9 percent, the most in a year. MCB Bank Ltd., the largest publicly-traded lender, rose 4.4 percent. The rupee added 0.2 percent and dollar-denominated government bonds gained.
Still, the KSE 100 ended August with a 5.8 percent decline, the most in three years, as thousands of anti-government protesters camp outside parliament. Pakistani military chief General Raheel Sharif met opposition leaders Imran Khan and cleric Tahir-ul-Qadri in Islamabad yesterday, along with Prime Minister Sharif, in an effort to end the impasse.
“When the army steps in, you get a comfort factor,” said Faisal Bilwani, head of equities at Elixir Securities in Karachi. “The fear of unrest and violence has subsided significantly now.”
The intervention of the army, which led a 1999 coup, may hasten the resolution of a political crisis fueled by the opposition’s allegations of fraud in last year’s general election that brought Sharif back to power. The vote marked the first-ever democratic transfer of power in a country that has been ruled by the army for more than half of its history.
“The government has become weak after the standoff,” Muhammad Imran, chief investment officer at ABL Asset Management Co. in Karachi overseeing 24 billion rupees ($236 million), said by phone. “It will be tough making decisions such as raising power tariffs as they will face pressure from the opposition.”
The turmoil has jeopardized a partially-disbursed loan from the International Monetary Fund and distracted military leaders as they battle Taliban insurgents on the Afghan border.
Pakistan and the IMF had agreed in September last year to a $6.6 billion loan that will be disbursed in tranches over 36 months to boost the nation’s depleted currency reserves and help stabilize the economy. The country will end energy subsidies and curb a budget gap by raising funds through bond and asset sales as part of the deal.
The KSE 100 has risen 13 percent this year on speculation government reform efforts, including the privatization of state-owned companies and lower power subsidies, will improve economic stability after it received the IMF loan last year.
The Pakistani rupee rose to 101.776 versus a dollar, paring its decline in August to 2.9 percent. The nation’s dollar-denominated government bonds due in April 2019 advanced today. The yield on the 7.25 percent notes dropped 5 basis points, or 0.05 percentage point, to 6.73 percent, data compiled by Bloomberg show.