Pakistani business banks on political stability

By Simon Gardner and Faisal Aziz - Analysis

KARACHI (Reuters) - President Pervez Musharraf's fate hangs in the balance, Pakistan's next government has yet to take shape and the economy faces myriad challenges, but Pakistani business can see the light: long-elusive political stability.

As the party of slain opposition leader Benazir Bhutto started to build a coalition on Wednesday after polling first in Monday's general election, earlier fears that a forced Musharraf exit could undermine political and economic stability faded.

Shares on the Karachi stock exchange hit a new life high on Wednesday as investors cheered the fact the poll passed off peacefully and without controversy.

Pakistani shares fell 4.7 percent in a single day following Bhutto's December killing, the bourse's biggest daily loss in 18 months, while the Pakistani rupee hit a six-year low.

"The uncertainty is gone," said Shaukat Tarin, financier and chairman of the Karachi Stock Exchange. "The investor community has heaved a sigh of relief that the people of Pakistan have spoken, the polls were fair and accepted by all parties."

Bhutto's Pakistan People's Party (PPP) has vowed to put before parliament the issue of the president's future, whose popularity has largely disintegrated over the past year, especially after he imposed a stint of emergency rule in November.

But first the PPP must secure power. The PPP and the party of former prime minister Nawaz Sharif dominated the election, while the Musharraf-backed Pakistan Muslim League was routed.

Analysts warn that ideological differences and past bad blood could scupper an alliance between the PPP and Sharif, in which case, the PPP's doors could re-open to Musharraf's friends.