Regional unrest spooks Pakistan shares

An influx of refugees will strain Pakistan's economy

Pakistani and Indian investors are having the jitters, worried about the crisis in Afghanistan and its economic fall-out.

In Pakistan, the economic situation is made worse by the country's refugee crisis, with thousands of Afghani's trying to cross the borders illegally, hoping to join the millions of refugees already there.

The worry are not so much the military strikes on Afghanistan themselves, but the long-term political and social consequences for Pakistan.

Traders had already factored in the possibility of air strikes so there was little in the way of panic selling, and the main index in Karachi slipped just over 3%.

Muddassar Malik, director of BMA Capital in Karachi, told the BBC's World Business Report that there was a low volume of trading as people were more focussed on other events.

Over the past month the stock exchange has lost 10% of its value, and now stands at a two-and-a-half-year low.

Refugee problem

Mr Malik said he did not anticipate things getting really bad on the markets, because a recently introduced rule permitted share prices to fall not more than 5% below their opening levels.

But he said there was concern about the Afghan refugee problem and how that might affect Pakistan's economy.

"The key question is how the government will cope with the economic and social fallout of the refugee problem," he said.

There were also worries that exports might be affected, with the textiles industry bearing the brunt.

But President Pervez Musharraf has tried to reassure the nation, saying it was business a usual in Pakistan.

In a televised address after the air strikes, he attempted to convey a feeling of normality.

"People are going to work and factories are turning out new products," he said.

Nervous mood

In neighbouring India, the Bombay market was down 1.5%.

Vijay Bhambwani from BSLB India.com, told the BBC's World Business Report that the mood was rather nervous and cautious.

"Although India does not have a border with Afghanistan the attacks will have an impact," he said.

"The country is becoming more integrated with global markets and does depend to a certain extend on global trade, foreign direct investment and exports", he added.