Foreign investors hold their nerve in Pakistan

By Sahar Ahmed

KARACHI, Feb 11 (Reuters) - Foreign investors who have stuck with Pakistan are clearly made of stern stuff as it heads towards an election on Feb. 18 that, while not a presidential poll, could put President Pervez Musharraf's future in doubt.

While the world frets over a nuclear-armed Muslim nation that al Qaeda wants to destabilise and is still reeling from the assassination of opposition leader Benazir Bhutto, the investment community has largely held its nerve.

"Formation of a stable democratic government will be the most important event to consider," said Mark Mobius, executive chairman at Templeton Asset Management Ltd.

"Investors are still keen on Pakistan and there has been no sharp withdrawal of capital from Pakistan despite the recent events as well as the financial turmoil across the world," Mobius said. "In fact, markets in Pakistan have been fairly resilient."

The Karachi stock market was among the best-performing markets in 2007, gaining more than 40 percent.

It has only lost 5.64 percent since Bhutto's death on Dec. 27, even though she was regarded as the most popular Pakistani leader, the most progressive and the most friendly to the West.

"We went through a rocky period after Bhutto's assassination, and what really came out since is that investors have not run away. They might have trimmed positions but they are now looking to make an entry at good valuations," said Ahsan Chisty, head of international institutional sales at BMA Capital Ltd.

According to central bank data, from July 1 to Feb 7 there was a net outflow of $40 million from Pakistani stocks and government securities.