Pakistan Stocks Rise Most in 9 Months as Gilani Restores Judges

By Farhan Sharif and Liza Lin

March 16 (Bloomberg) -- Pakistan stocks rose the most in nine months after Prime Minister Yousuf Raza Gilani pledged to reinstate Supreme Court justices fired under military rule in 2007, ending a confrontation with the opposition.

Chief Justice Iftikhar Chaudhry and other deposed judges will be restored on March 21, Gilani said in a 6 a.m. televised address in Islamabad, meeting the demands of thousands of protesters who are challenging President Asif Ali Zardari. Authorities will also lift a ban on rallies and release detained protesters, he said.

The benchmark Karachi Stock Exchange 100 Index rose 304.93, or 5.3 percent, to 6,055.40 at 9:40 a.m. local time, the most since June 24, 2008. Oil & Gas Development Co. and Pakistan Petroleum Ltd. led gains on the index.

“Political developments are in favor of the market,” said Tariq Iqbal Khan, chief executive officer of National Investment Trust, the country’s biggest money manager, which manages 78 billion rupees in stocks ($970 million). Terrorism is “the only negative left” for the nation’s stock market, he said.

Oil & Gas Development, the biggest fuel explorer, added 5 percent to 59.38 rupees. Pakistan Petroleum, the nation’s largest gas explorer, advanced 5 percent to 156.36 rupees. The two stocks made up a fifth of the index’s advance today.

The reinstatement is a victory for opposition leader Nawaz Sharif, who yesterday defied house arrest to rally thousands of supporters in Lahore. Sharif responded to Gilani’s pledge by calling off a rally planned for today in Islamabad. The U.S. issued a statement praising the government and calling the reinstatement of the judges a “substantial step.”

‘Acted Quite Wisely’

“The government has acted quite wisely and we expect the political tension has now defused,” said Atif Malik, head of international equity sales at JS Global Capital Ltd. in Karachi. “If there is political stability, then we might see foreigners returning back.”

Overseas investors sold $356 million of Pakistani stocks in the seven months ended Jan. 31, after they purchased $400,000 of shares a year earlier, according to central bank data.

Sharif and Gilani will meet in the capital today, Dawn News television reported. Protests have weakened Zardari’s grip on the nuclear-armed nation since the current Supreme Court barred Sharif and his brother from running for office last month.

Gilani didn’t say whether the government would lift its temporary federal rule of Punjab, the province that includes Lahore, where Sharif’s brother Shahbaz was chief minister until his ban.

The U.S. had urged Zardari, 52, and Sharif, 59, to calm the conflict, which it says distracts Pakistan from fighting Islamic militant guerrillas. Secretary of State Hillary Clinton called both men on the issue over the weekend, their aides said.

“Now that the political tension has been removed, we might see some consensus among the big political parties in the coming days and that might pave the way for a strengthening in the government,” said Sajid Bhanji, a dealer at Arif Habib Securities Ltd. in Karachi. “Definitely we might see some going forward of the index in coming days.”

To contact the reporters on this story: Farhan Sharif in Karachi at fsharif2@bloomberg.net; Liza Lin in Singapore at Llin15@bloomberg.net.