Peace hopes boost Karachi stocks

Karachi equity traders had a good day

Shares on the Karachi stock exchange have posted their biggest ever one-day rise, lifted by signs that relations between Pakistan and India are thawing.

The country's main share index closed 4.8% higher on Monday, beating the previous record set on 18 September.

The rally came after officials said India and Pakistan were set to restore air links next month.

Flights between the two countries were halted in 2001 during a tense stand-off over the disputed region of Kashmir.

Defused

The confrontation brought the two nuclear powers to the brink of war, with both countries massing troops along their borderS.

Shuja Rizvi, head of sales at Capital One Securities, said traders had been "overjoyed" by the restoration of air links.

"The market is very excited on the prospects for peace," he said.

The decision to resume flights is the latest in a series of recent signals that relations between India and Pakistan are on the mend.

The two sides have agreed a ceasefire along the line of control in the disputed territory of Kashmir, diplomatic relations have been upgraded, and a bus service between the Indian capital, New Delhi, and Lahore in Pakistan has been restored.

London service

However, sticking points remain.

India says it will not take part in formal peace talks until Pakistan stops supporting Muslim militants combating Indian rule in Kashmir.

Pakistan denies supporting militants, and accuses India of human rights abuses in the disputed province.

Separately, the UK's national airline BA said on Monday it had resumed flights between London and Islamabad in Pakistan after receiving assurances over security arrangements at Islamabad airport.

BA suspended the service in the wake of the 11 September attacks.