KARACHI: 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.
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 per cent 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 per cent from these companies; that compares fairly well with the short term interest rate in Pakistan.
Along with earning 6.9pc 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 10pc a year and the profit had increased at an average of 12pc 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 14pc this year he said. Similarly China’s market suffered a set-back of some 25pc like several other markets which faced turbulence of more or less same magnitude.
He added that the emerging market currencies had also been affected. Some countries had devalued their currencies by over 90pc. Argentina’s currency was devalued by 90pc, India’s currency by 15pc and Pakistan’s currency by up to 19pc. 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 are affected 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.
Pakistan Stock Exchange’s Chief Executive Officer Richard Morin said “We do not know if the market will go up tomorrow or next month, but we know that you are going to get excellent returns over the long run.
Pakistanis should resist temptation of thinking short term. You need to think long term for investments in stocks, he said. “If investors have faith in the economy and in the country, they must invest in shares of these listed companies. They are incredibly attractive buys at these levels.” Richard Morin said that transformation at PSX had already started and would continue for the next three years. Besides transformation, the objective was to bring more Pakistanis to invest in our market.
Published in Dawn, November 4th, 2018