STOCKHOLM: A Swedish asset manager specialising in frontier and emerging markets has declared the performance of the Pakistan Stock Exchange (PSX) better than India’s stock market.
Founder and Chief Investment Officer at Tundra Fonder, Mattias Martinsson, in a series of tweets explained his preference for investing in Pakistan’s stock market instead of India’s bourse. He suggested investing in Pakistan instead of India, citing three strong reasons.
First, over the past decade, Pakistan’s stock market has performed better than India’s, in terms of USD. Pakistan’s benchmark index, the KSE-100, has outperformed India’s Sensex Index in terms of total returns (USD), as shown in this graph based on Bloomberg data.
Why I prefer to invest in #Pakistan over #India? Three arguments:
1 (3) – The market has performed better (yes, in USD) pic.twitter.com/go4nVwHPTO
— Mattias Martinsson (@Tundra_CIO) November 24, 2020
Secondly, the earnings per share (EPS) growth of the KSE index has also been higher in terms of USD when compared to Sensex’s earnings. This means that not only the index shows better and higher activity, but the listed companies are also better performers.
The third reason he cited in favour of investing in the Pakistani stock market was that the expectations are low. In financial terms, this translates into a lower price-earnings ratio (P/E) of the KSE-100 index as compared to the Sensex P/E ratio over the past ten years.
P/E ratio is a tool universally used to determine the stock valuation. A high P/E ratio means that the stock is overvalued which means that it costs more than its actual value based on the predicted returns.
3 (3) – Expectations are lower pic.twitter.com/DuUHGN6BLh
— Mattias Martinsson (@Tundra_CIO) November 24, 2020
