Should I invest in KSE-100 at +90K levels today?

To short term investors: "Mujh se pehli si mohabat, mere investor na mang"

It's clear that fear of missing out (FOMO) is kicking in like a pandemic in the society. Those who had been naysayers and criticized the short, medium and long term prospects of Pakistan by creating a doomsday scenario are getting "cautiously" optimistic.

While others who had bought the fundamental valuation and bet on "this too shall pass" are enjoying the beautiful ascent of more than 100% in KSE 100.

That's behind us and equity market is rewarding investors - optimists, realists and opportunists - in handsome way for 5-6 years of under performance against USD, Fixed Income and Gold. But what lies ahead if the million dollar question? Should people take entry positions right now or they have missed the boat already?

You must know that easy money is off the table. There were "good" and "very good" companies with long term prospects, debt sustainability and strong corporate governance available at "very good" price (valuations) of 2-3x Price to Earnings ratio.

Despite quick run up, some of them are still trading at 4-6x P/E ratios with near double digits dividend yields and asset value of 1/3rd or 1/4th of their replacement value. All is not lost.

What you have essentially missed is the first leg of rally. In the second leg, investors and market would want to see tangible updates on fundamental turnaround in the economy and it's trickly down impact on the equity markets underlying companies current and future profitability.

There has been a net USD 100M inflows already in this fiscal year from Mutual Funds (insurance companies indirectly through Mutual Funds) and this is not the end.

Just as interest rate rise was sharpest in the decade, the monetary easing of nearly 8-10% will also be sharpest in this fiscal year and would definitely help listed companies with reduced financial costs the most leading to higher EPS and future growth.

Macroeconomic turnaround also increases domestic activity leading to volumetric and margins growth and controlled inflation/currency leads to lesser material and admin costs hike. Hence, many debt ridden companies trading at distressed level may fix the house quickly to show inflection point.

BUT! do not expect the market to give you returns that it has in last year and a half. In the long term - forever buy and hold - equity markets have given higher than fixed income and gold returns over 20-25 years horizon marginally by index returns of 15-20% (depending upon starting point).

Nevertheless, you should buy the economic cycle and the broader theme of sustainable growth leading to mean reversion of valuation. If Pakistan comes back to Pakistan's valuations, there remains considerable upside.

If the government can miraculously privatize SOEs - go for PIA rebidding again and make it debt free, let investors fire people, give them tax exemption and incentives as foreign airlines - reduce the government footprints, attract FDI that increases exports and reduces imports as win-win and bring tax to GDP finally to equitable 13% Tax to GDP - there will be many surprises and repeat of another boom.

But do not get carried away and monitor share prices every day, week or month. Your money market mutual funds/bank deposits will yield less than 10% after tax pretty soon - those who invest may be ready for 6-8 months of flat market period after seeing a peak in the first wave of rally.

Just like in 2011-12 we could see one year of range bound index when large caps do not perform and mid cap/growth companies wait for 3-4 quarters of profitability trend to give confidence to investors for medium term.

This should be your approach - otherwise, you're better off earning fixed returns instead of losing money again with unnecessary churning and impatient approach. Remember market rewards those who are patient and take a bet on solid companies and if you want to double your money every six months - you are in the wrong businesses.

At every time you must know yourself transparently and communicate this to your investment advisor (if it is you in your case). How much time can I invest the money for? Can i tolerate 30% loss in wealth? how much is this capital as % of my total liquid and otherwise wealth? What return would I get in alternative investments after tax? Do I need regular dividends and am happy with normal equity returns plus risk premium?

In my opinion, it's not over until valuations peak out and euphoria kicks in. While there is short term greed on the street - it was blood last year though - the fat lady is yet to sing and monthly portfolio building activities in early stage of lives can lead to tangible sum for your retirement and early retirement goals. Equities should still be part of your wealth today.

Especially, if Trumpnomics brings oil back to 60s or below with higher US production to 15MBPD, Pakistan as net energy importer is set for another boom. This is my hypothesis - find your own and take a leap of faith before you look back three years from today at 2024 and say "ah should have invested when KSE 100 was 90k as today at 160-170k, it's very expensive". There will ways be (over) optimists analyst and investment advisors telling you upside it there till 200k! It's your hard earned money - invest wisely to avoid regretting