LONDON, Dec 27: Former prime minister Benazir Bhutto’s assassination will boost perceived risk in the country, analysts warned on Thursday, but some said it was not in itself surprising enough to substantially change investor sentiment.

News of her assassination sent global gold and oil prices higher, also unsettling global foreign exchange markets.

“The killing of Bhutto will likely lead to further political and social instability in Pakistan and across the subcontinent,” Swiss investment bank UBS said in a research note.

Credit ratings agency Standard and Poor’s (S&P) said the country’s sovereign foreign currency rating of B+ could be lowered if the assassination was followed by instability, making it more difficult for the country to borrow money in global markets.

“If this assassination ushers in a period of heightened political instability, the ratings will be lowered,” John Chambers, chairman of S&P’s sovereign rating committee said.

The credit rating of the country is not expected to change in light of the assassination, Moody’s Investors Service said on Thursday, if the country’s economic policy framework does not change.

Moody’s rates Pakistan “B1” with a negative outlook, similar to the “B+” rating with a negative outlook from S&P’s. Both ratings are four notches below investment grade.

The five-year credit default swaps, used to insure against restructuring or defaulting debt, widened by around 100 basis points on the news, implying traders felt the country’s debt was higher risk.

The attack took place after the stock market closed for the day and with little trade reported on the rupee. Both were seen potentially falling on Friday.

“Politically it is bad news,” said Shanat Patel, global emerging equities strategist at Nomura International in London.

“We will have to wait and see what happens but it is unclear whether it will derail the economic reform process.”

Pakistan forecasted a growth of 7.2 per cent in the year to June 2008.

“This is not Pakistan itself under threat. This is an assassination in an election campaign and has to be seen in that context,” said Jennifer Harbison, Asia desk head for London-based consultancy Control Risks.—Reuters