Moody's believes that the imposition of emergency rule represents a further erosion in Pakistan's governing capacity and underscores Pakistan's heightened political instability.
President Musharraf's narrowing domestic support base and shakier relations with the U.S. and other key international allies now appear to be a greater threat to investor confidence than was true in the past.
Political turbulence in Pakistan since the beginning of this year had been shrugged off by foreign investors and domestic market participants, who remained confident that the country could muddle through. "However the balance of risks now appears to be shifting to the downside," said the analyst.
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