Comment on Khakwani Sahib’s post about Pakistani stock market.
There is no bubble, sir.
I don’t work in Pakistani stocks. But the basic principles are the same everywhere.
The market was undervalued. And the main reason for this is that the market has not grown in the last three years. Although the dollar doubled.
Obviously, if you look at the prices of the basic assets of the companies, they have doubled because of the dollar, but this was not affecting the share market.
This equilibrium had to be reset which is happening now. The market is still quite down and it will go up quite a bit in the next year and a half.
Now the question arises whether I would like to invest in this market?
So the answer is no.
The reason is that I don’t see the profit in Pakistani Rupees but in Dollars or, being in the UAE, in Dirhams. Dirhams and dollars are the same, so take either.
The point is, why should I invest in a market that has not even hedged the Pakistani currency against the dollar in the last three years?
In some time to come, the index will reach 100,000, which is now 63,000. But if I, on the contrary, increase my holdings in the US dollars, I will have double profit.
For one, since my money is in dollars, there will be an inflation hedge against the Pakistani rupee. Second, the benefits of going up US dollar, which has been running for over 100 years, are different.
So this is my personal preference.
The rest is your preference and you decide accordingly.
-Muzmal Sheikh Bismal
