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Bhutto murder unlikely to tarnish allure of Indian, Asian markets, fund managers say

Bhutto murder unlikely to tarnish allure of Indian, Asian markets, fund managers say

The assassination of Pakistan's moderate opposition leader Benazir Bhutto is unlikely to derail fund flows into neighboring India and other emerging markets in Asia, fund managers said Friday.
And while the attack on Bhutto _ a two-time former prime minister _ was expected to weigh, at least initially, on Pakistan's markets, it would not impact real economic growth in the South Asian country, they said.
"After the initial shock and panic, the economy in Pakistan will move ahead _ after all, this is the latest in a long line of assassinations in the country," Templeton Asset Management Managing Director Mark Mobius said.
Bhutto was killed after addressing a campaign rally Thursday. Her death, ahead of elections scheduled for Jan 8., comes after a similar attempt in October, and has sparked concerns about instability in the nuclear-armed country.
Analysts said, however, that, while the country's elections may well now be delayed, Pakistan's economy is unlikely to be hard hit.
Pakistan's economy is expected to grow by 5.5 percent next year, predicted Sebastien Barbe, a senior economist at investment bank Calyon. But he noted that inflation, which accelerated to up to 9 percent year-on-year last month, "may generate some discomfort."
Pakistan's stock market, up about 47 percent this year, will be shut for three days in a bid to limit fallout from Bhutto's murder.
Stock markets across much of Asia sank Friday, partly on anxiety about Pakistan. But in India, the market reaction was muted, with the benchmark Sensex index down just 0.1 percent in afternoon trading.
Outside Pakistan, no market faces greater risks from instability in Pakistan than India, a key emerging market fund destination. The two nations have warred three times since the 1947 partition of the subcontinent.
Analysts said Bhutto's death was not likely to impact the long-term flow of funds into the region. While the U.S. subprime debacle has resulted in a global credit crunch, funds have been pouring into Asian stock markets, where economic performances have remained robust.
Investors were discerning enough not to get caught up in a general flight from risk caused by events in a single, frontier emerging market, Mobius said.
"(The assassination) won't have an impact on raising risk perception, as everyone knows there was a big risk in investing in Pakistan, and people nowadays are sophisticated enough to differentiate between Pakistan and markets like India or China," he said.
Observers sought to differentiate between the hit to sentiment and the material impact on markets.
"This could put a higher risk premium on geopolitical conditions," said Prashant Patel, director at Impetus Wealth Management. "While there is no material impact on (Indian) stocks, investors' sentiment is definitely hurt."
Longer-term, fund managers say the assassination won't damage the allure of Indian stocks.
"In our view the uncertainty will focus much more on Pakistan's domestic affairs than on relationships with India," Calyon's Barthe said.
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Nisha Gopalan is a correspondent for Dow Jones Newswires.


Updated : 2021-06-21 02:59 GMT+08:00