Pakistani stocks jumped by 4.5 per cent yesterday after President Pervez Musharraf announced that he was leaving office after nine years in power, dealers said.
The benchmark Karachi Stock Exchange KSE-100 Index finished the day up 460.91 points to close at 10,719.62.
"The market has gone upward now that the uncertainty regarding the country's political scenario is over with the resignation of Pervez Musharraf," said analyst Azhar Ahmad Batla of the WE Brokerage House.
"The market could grow more and the rupee could get stronger against the dollar if the country sees good governance in future, but it could go down if the political scene is again troubled."
The market has shed more than 30 per cent since April this year when it reached its highest ever level.
The rupee, which had lost a quarter of its value this year, began strengthening.
"It eliminates all the uncertainty in the market," said Asad Iqbal, Managing Director at Ismail Iqbal Securities.
"The government will hopefully start concentrating on the economy... they have no excuses now and they have to perform."
Musharraf quit office yesterday to avoid impeachment charges, nearly nine years after the key US ally in its campaign against terrorism took power in a coup.
The intense uncertainty has taken a toll on Pakistani markets, with the main Karachi Stock Exchange index hitting near 23-month lows earlier last week, while the rupee edged closer to all-time lows posted early last month.
Investors have harboured doubts over whether the civilian coalition government has the ability to handle widening trade and fiscal deficits and inflation at a three-decade high.
Speculation the former army chief would resign had mounted since the fractious coalition government, led by the party of assassinated former prime minister Benazir Bhutto, said this month it planned to impeach him.
Celebrations broke out across the country after the announcement, with people dancing and handing out sweets.