State companies, such as Pakistan International Airlines, Pakistan Steel Mills, the Water and Power Development authority and Employees Old Age Benefit Fund, will be allowed to invest.

So far, companies could buy shares only of banks listed on the Karachi Stock Exchange (KSE).

Securities and Exchange Commission of Pakistan (SECP), the stock market regulator, is currently preparing the regulatory framework to allow the investments.

Market boost

Last year Pakistan had one of the world's best performing stock markets - gaining 114% - as the country benefited from aid and the relaxation of economic sanctions after supporting the US war against terrorism.

Domestic interest rates have also fallen pushing investors' funds into higher yield products.

Pakistan's state-run companies are estimated to hold about 100bn rupees (�1.1bn; $1.8bn) in funds.

Pakistan's stock market, one of Asia's smallest markets with capitalisation of $8bn, hit an all-time high on 16 January and has since fallen about 18%.