Pakistan offers great opportunities for investors: CEO PSX
KSE-100 Index stocks’ sales increased by 10pc, profit by 12pc in a year, says Richard Morin
Chief Executive Officer (CEO), Pakistan Stock Exchange, Richard Morin on Saturday said he saw tremendous opportunities for investors, where they could buy PSX equities, specially KSE-100 Index stocks, at a very attractive price.Investors can buy equities at a price-earnings ratio of 7.6 times today, he said this while talking to APP here.In comparison, the regional players are trading at 13 to 14 times of their earnings.
That was a very important number. When Pakistanis buy shares of listed companies, they are in fact buying part of their future profits, he added. Pakistani investors only pay Rs 7.6 per rupee of annual profit earned by these companies whereas investors elsewhere in the region are paying Rs 14 per rupee of annual profit.The last time Pakistan equities were so attractive, in 2012, the annual returns for the next five years were over 20 percent at PSX.
So Pakistani equities were very attractive from that point of view right now, Richard Morin said.He said the stocks listed at PSX were equally attractive from dividend yield point of view as well. By buying KSE-100 Index stocks, the investors would get an annual dividend of 6.9 percent from these companies; that compares fairly well with the short term interest rate in Pakistan.Along with earning 6.9 percent dividend, he said, an investor would also participate in the growth of these companies and of Pakistan’s economy.He said that over the years, KSE-100 Index stocks had increased their sales by an average of 10 percent a year and the profit had increased at an average of 12% a year, all of which ultimately accrues to investors/shareholders.”I would tell Pakistanis now is a very good time to buy PSX shares. If you read newspapers, it seems people will find good reasons not to buy PSX shares at this level. I think they are mistaken”, he said, recommending to buy shares of PSX listed companies and keep them in their portfolios for the long term.If the buying of shares is complicated for unsophisticated investors, they should buy mutual funds, he said. There are a number of very solid mutual funds companies in Pakistan. The investors must diversify their portfolios and should keep their investments for the long term, Morin added.Responding to a question about the negative performance of Pakistan’s capital market, Richard said the global economic and political developments had created ripples in the stock markets of the world.
The developing economies, he added were the worst affected.The capital markets around the world have been going through a period of turbulence; which has specially affected emerging markets, he said.The emerging markets index lost about 14% this year he said. Similarly China’s market suffered a set-back of some 25% like several other markets which faced turbulence of more or less same magnitude.He said the emerging market currencies had also been affected. Some countries had devalued their currencies by over 90 percent. Argentina’s currency was devalued by 90 percent, India’s currency by 15 percent and Pakistan’s currency by up to 19 percent.
It was not possible for Pakistan to escape this scenario of devaluation.Morin said that the global emerging markets were not doing well this year. It needs to be watched what was going on around the world.All the financial markets, including emerging markets like Pakistan, go through cycles and they areaffected by global events such as United States’ increasing its interest rates, the US has strained relations with China and much of the rest of the world and oil price was also going up.These three factors had been generally negative to the emerging markets. As unpleasant as it may be, it was not something that long term investors should be too worried about. All of this must be viewed in a global perspective.