Yet investors have been more worried about the Supreme Court destabilising Musharraf, who came to power in a coup eight years ago, than the burgeoning militant threat.
KEPT DANGLING
The court said it will adjourn after Friday's session until Nov. 12 -- just three days before Musharraf's present term expires, with parliament also coming to the end of its term.
Constitutional experts say he can carry on as president after Nov. 15, but doubts over his position and how he will react if the ruling goes against him have heightened apprehensions.
"This bench will not be intimidated by any threats," Justice Javed Iqbal said, after lawyers noted warnings made by ministers that authoritarian steps could follow any adverse ruling.
Most analysts and foreign diplomats doubt whether the decision will go against Musharraf, and reckon the judges will fudge the ruling, possibly by binding the president to seek a fresh endorsement from the next parliament.
A Western diplomat said if it does go against him "all bets are off as to how Musharraf conducts himself".
Musharraf has promised he will quit the army if he gets a second term, and says he is committed to holding elections.
As part of a transition to civilian-led democracy he allowed opposition leader and former prime minister Benazir Bhutto to return from self-imposed exile without fear of being prosecuted for old corruption charges she says were politically motivated.
The government is determined not to permit back Nawaz Sharif, the prime minister Musharraf ousted. Sharif was put on a flight to Saudi Arabia when he tried to end his exile in September, and diplomats say that his absence means the vote won't be fair.
Bhutto flew to Dubai on Thursday to see her family, a day after she put off the trip citing fears Musharraf could impose an emergency. A spokesman said she will be gone up to four days.
The stand taken by Musharraf and Bhutto against the militancy swamping Pakistan has made them prime assassination candidates.
Seven people were killed in a suicide attack on Tuesday less than a kilometre from Musharraf's army residence in the garrison city of Rawalpindi, which neighbours Islamabad.
A suicide bomb attack in Karachi killed 139 people at a procession on Oct. 19 to mark Bhutto's return.
