You may not want to invest in Pakistan especially due to the political uncertainty that looms over the country driving the country into nothing less than chaos and being under a huge debt to external financers doesn’t help either. Since we like to compare everything we do with India, the question is how better is India really in terms of an investment candidate as compared to Pakistan?
In short, it may not be at all. As Mattias Martinsson, Chief Investment Officer (CIO) of Tundra Fonder, a Swedish asset manager specializing in frontier markets and new emerging markets, explains, for them, Pakistan is a way better candidate for capital investment as compared to India, and here is why;
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
As the above graph clearly shows, the market has been performing very well in Pakistan as compared to India. A better performing market generally means more return on investment so if you want to invest some money in a company, that is where you would go. Not only that, the Pakistani market was doing extremely well in terms of growth before the change of government, devaluation of the rupee, and repayment of loans. It can be seen that even now it is steadily growing after post-COVID-19.
2 (3) – EPS growth has been higher (yes, again, in USD) pic.twitter.com/gcoqIaPtAm
— Mattias Martinsson (@Tundra_CIO) November 24, 2020
The Earnings Per Share (EPS) growth for Pakistani companies in the KSE-100 index has also been way higher for the past ten years as compared to Indian companies in the SENSEX index. Why wouldn’t you want to invest in a company that has a good Compound Annual Growth Rate (CAGR) providing you more EPS?
3 (3) – Expectations are lower pic.twitter.com/DuUHGN6BLh
— Mattias Martinsson (@Tundra_CIO) November 24, 2020
Finally, the Price to Earnings (P/E) ratio of Pakistani companies has stayed almost double of Indian companies in the last ten years. P/E is a measure that shows how many earnings a company generated as compared to the price of its shares. If a company isn’t generating a lot of revenue but has a high share price, it would mean it is overvalued.
That is a short analysis by a swiss professional but it shows that if you invest correctly, the Pakistani market will reward you.
