I have been following some emerging market stocks for a few years now and recently noticed a sale on the PSX (Pakistan Stock Exchange). The country's economic condition is quite bad with high debt and large fiscal and trade deficits. Like a low-income person who perpetually uses debt to finance things they cannot afford, the country borrows money from the IMF to balance the budget. Side note: to me, the solution to the country's problems is quite obvious: reduce the 25% allocation to military down to 5% and privatize most government-owned businesses like the PIA.
Anyway, back to the bourse: seemingly blue-chip stocks have seen big declines: NESTLE, COLG, MARI, OGDC, etc. all have seen 15 - 30% declines. Automobile assemblers like HCAR and INDU have seen up to 60% declines.
These stocks are not on the same quality scale as Visa or Facebook, but I bet some of these will be a lot higher 10 - 15 years from now. I especially like 3 in the consumer space: NESTLE, COLG and PAKT. For Nestle and Colgate, Pakistan burgeoning middle class is a growth market. So although they trade at a hefty premium to the index, I have allocated a tiny portion of my portfolio to some of these companies.
Automobile assemblers like INDU and HCAR are also likely to do well as currently Pakistan only has about 2 cars for 100 people or so (developed countries have well above 60 cars for every 100 people). HCAR is selling for 5x earnings (though interest rates are at 12%)! But they will only do well as long as there is a huge import duty on cars. Cements like Lucky Cement may also do well (currently trading in the late 300s), but only because they are likely to steal market share from less organized players.
With interest rates at 12% and high inflation, this movie may have more volatility in the future. If the KSE100 index goes below 30k, I'll be taking bigger chunks!
Anyway, back to the bourse: seemingly blue-chip stocks have seen big declines: NESTLE, COLG, MARI, OGDC, etc. all have seen 15 - 30% declines. Automobile assemblers like HCAR and INDU have seen up to 60% declines.
These stocks are not on the same quality scale as Visa or Facebook, but I bet some of these will be a lot higher 10 - 15 years from now. I especially like 3 in the consumer space: NESTLE, COLG and PAKT. For Nestle and Colgate, Pakistan burgeoning middle class is a growth market. So although they trade at a hefty premium to the index, I have allocated a tiny portion of my portfolio to some of these companies.
Automobile assemblers like INDU and HCAR are also likely to do well as currently Pakistan only has about 2 cars for 100 people or so (developed countries have well above 60 cars for every 100 people). HCAR is selling for 5x earnings (though interest rates are at 12%)! But they will only do well as long as there is a huge import duty on cars. Cements like Lucky Cement may also do well (currently trading in the late 300s), but only because they are likely to steal market share from less organized players.
With interest rates at 12% and high inflation, this movie may have more volatility in the future. If the KSE100 index goes below 30k, I'll be taking bigger chunks!
