This is the best time to invest in Pakistan Stock Exchange (PSX) because the valuations are near all-time low and profitability is at all-time high.
As of May 2022, Pakistan Stock Exchange (PSX) is trading at Price-to-Earnings ratio (PE) of 4.2x, 50% discount to historical PE of 8.4x, and at 70% discount to Regional PE of 13.8x.
Earnings yield of the stock market stands at 23.8% versus 10-year Pakistan Investment Bond (PIB yield) of 12.9%. This translates to a record high yield differential of 10.9% versus historical yield differential of 1.2%.
As per Bloomberg, the lowest PE PSX have ever experienced was on 26th January 2009, at 3.92x. The 1-year, 3 year, and 5-year stock market returns following that date were 101%, 146.8%, and 460.8%, respectively.
Corporate earnings growth for CY21 stood at 48.1%, highest ever for any year since 2005 (when majority of corporates got listed). Despite the high base, 1QCY22 growth has been estimated at 33% year on year.
Likely resumption of IMF program in the near future will result in additional financing and rollovers from China, Saudi Arabia, and the UAE.
Also additional flows from multilateral agencies like World Bank, ADB, IDB etc. are expected to materialize.
The Pakistan Stock Exchange (PSX) is a stock exchange in Pakistan with trading floors in Karachi, Islamabad and Lahore. PSX was classified by MSCI as a frontier market on 8 September 2021
The PSX was established on 11 January 2016 after the merger of the Karachi Stock Exchange, Lahore Stock Exchange and Islamabad Stock Exchange. As of January 2022, there are about 375 companies listed on the PSX with a total market capitalisation of PKR 7,756 billion (USD$52 billion).
Investors on the exchanges include 1,886 foreign institutional investors and 883 domestic institutional investors along with about 220,000 retail investors. There are also about 400 brokerage houses which are members of the PSX as well as 21 asset management companies.
One of the PSX’s constituent stock exchanges, the Karachi Stock Exchange, was listed among the world’s best performing frontier stock markets: between 2009 and 2015 it delivered an average 26% return annually. In December 2016, PSX sold 40% strategic shares to a Chinese consortium for US$85 million.