DATE=5/20/98
TYPE=CORRESPONDENT REPORT
NUMBER=2-232515
TITLE=PAK ECONOMY (L) CQ
BYLINE=ALI ZAIDI
DATELINE=ISLAMABAD
CONTENT=
VOICED AT:
INTRO: RISING TENSIONS WITH INDIA AND FEAR OF SANCTIONS AFTER A
POSSIBLE NUCLEAR TEST ARE PLAYING HAVOC WITH STOCK MARKETS IN
PAKISTAN. THE KARACHI STOCK EXCHANGE HAS LOST MORE THAN
20-PERCENT OF ITS VALUE SINCE INDIA CONDUCTED FIVE NUCLEAR TESTS.
BUT AS ALI ZAIDI REPORTS FROM ISLAMABAD -- MUCH OF THE DAMAGE HAS
ALSO BEEN CAUSED BY THE GOVERNMENT'S GROWING CONFRONTATION WITH
PRIVATE POWER COMPANIES.
TEXT: THE INDIAN NUCLEAR TESTS HAVE THROWN PAKISTAN'S STOCK
MARKETS INTO FREE FALL. ANALYST ALI ASGHAR OF KARACHI'S FORTUNE
SECURITIES COMPANY TELLS V-O-A INTERNATIONAL INVESTORS WERE
ALREADY WARY IN THE WAKE OF THE GOVERNMENT'S CONFRONTATION WITH
PRIVATE POWER COMPANIES.
// ASGHAR ACT //
INITIALLY THE MARKET STARTED SLIDING DOWN, WHEN MARKET
WAS 1620 IT STARTED GOING DOWN TO 1500 LEVEL WHILE THERE
WAS THE PROBLEM OF THE IPP'S (INDEPENDENT POWER
PRODUCERS), OF THE GOVERNMENT WITH THE IPP'S. BUT LATER
ON UNFORTUNATELY THERE WERE THE NUCLEAR TESTS BY INDIA
SO THAT CREATED CHAOS IN THE MARKET AND THE MARKET
STARTED GOING DOWN AT AN AVERAGE OF 50-POINTS PER DAY.
YOU SEE WHEN THERE IS THIS FEAR OF A NUCLEAR TEST OR WAR
OR SOMETHING LIKE THAT, OR UNSTABLE POLITICAL
CIRCUMSTANCES, DEFINITELY THE EQUITIES MARKET IS THE
FIRST TO BE AFFECTED BY THAT.
// END ACT //
WEDNESDAY THE KARACHI STOCK EXCHANGE FELL TO ITS LOWEST LEVEL IN
FOUR-YEARS. THE WEEK-LONG COLLAPSE HAS SEEN THE MARKET LOSE MORE
THAN ONE-BILLION-DOLLARS -- MORE THAN 20-PERCENT OF ITS TOTAL
VALUE.
A COURT ORDER THIS WEEK ORDERING POWER RATE CUTS LED TO PANIC
SELLING IN ENERGY SECTOR STOCKS. THE PAKISTAN GOVERNMENT CHARGES
MANY PRIVATE POWER COMPANIES RECEIVED CONTRACTS AT UNREASONABLY
HIGH RATES BY BRIBING MEMBERS OF THE PREVIOUS GOVERNMENT OF
BENAZIR BHUTTO. THE COMPANIES DENY THE CHARGE.
/// OPT /// MR. ASGHAR SAYS ENERGY SECTOR STOCKS WERE AT ONE
POINT THE MOST ATTRACTIVE INVESTMENT OPPORTUNITIES IN THE
COUNTRY.
/// OPT ASGHAR ACT ///
MOST OF THE FOREIGN INVESTMENT WAS IN THE ENERGY SECTOR.
BECAUSE THE ONLY SECTOR THAT WAS PERFORMING WELL WAS THE
ENERGY SECTOR, AND ENERGY SECTOR HAD A LOT OF
POTENTIAL. BUT ALL OF A SUDDEN WHEN THE INVESTOR CAME
TO KNOW THAT THE GOVERNMENT IS GOING TO TAKE DRASTIC
ACTION AGAINST THE IPPS, THEY STARTED SELLING IT.
/// END ACT // END OPT ///
ANALYSTS SAY BOTH FOREIGN AND LOCAL INVESTORS ARE DESERTING THE
MARKET AS TENSIONS RISE BETWEEN PAKISTAN AND INDIA -- ESPECIALLY
OVER FEARS OF WAR IN THE DISPUTED HIMALAYAN STATE OF KASHMIR.
MR. ASGHAR SAYS THE SITUATION WORSENED AT THE BEGINNING OF THE
WEEK WHEN RUMORS SPREAD IN THE MARKET OF TROOP DEPLOYMENTS ON THE
BORDER BETWEEN THE TWO COUNTRIES.
INVESTORS ARE ALSO SAID TO BE CONCERNED ABOUT THE EFFECT OF
SANCTIONS THAT WOULD BE IMPOSED IF PAKISTAN GOES AHEAD WITH A
NUCLEAR TEST. PAKISTAN'S FOREIGN MINISTER SARTAJ AZIZ SAYS SUCH
SANCTIONS COULD COST NEARLY THREE-BILLION DOLLARS.
SOME EXPERTS SAY IF THE SCALE OF SANCTIONS IS THE SAME FOR
PAKISTAN AS THAT FOR INDIA, PAKISTAN WOULD LIKELY FACE DEFAULTING
ON ITS HUGE PUBLIC SECTOR DEBTS -- LEADING TO A UNILATERAL
GOVERNMENT MORATORIUM ON DEBT REPAYMENTS AND A FREEZE ON FOREIGN
EXCHANGE ACCOUNTS.
BUT A FOREIGN BANK OFFICIAL TELLS V-O-A THERE IS NO INDICATION
SUCH DRASTIC MOVES ARE IN THE OFFING, AND FOREIGN FINANCIAL
INSTITUTIONS HAVE NOT DIRECTED A PULL BACK FROM ANY DEALS.
BANKING SOURCES SAY THE CURRENCY MARKET IS NOT EXPECTING ANY
FREEZE ON FOREIGN CURRENCY ACCOUNTS OR A DEBT MORATORIUM.
ANALYSTS SAY IF PAKISTAN DOES EXPLODE A NUCLEAR DEVICE, THE
COUNTRY'S STOCK MARKETS WOULD PLUNGE FURTHER. (SIGNED)
NEB/AZ/RAE
20-May-98 12:59 PM EDT (1659 UTC)
NNNN
Source: Voice of America
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