Pakistani investors are facing an increasingly bullish market with the KSE-100 index surging 84% in 2024 and gold prices significantly rising. Investment experts suggest a diversified approach, favoring stocks as the primary asset, followed by gold and a cautious allocation to cryptocurrencies. Assessing investment based on age and risk tolerance is emphasized for prudent portfolio strategies.
In Pakistan’s recent financial climate, investment opportunities across different assets have gained significant attention. Within the Pakistan Stock Exchange, the KSE-100 index experienced an impressive increase of 84 percent in 2024, reaching 115,127 points and subsequently climbing to 117,806.75. Concurrently, gold prices surged to Rs325,000 from Rs272,600, reflecting a substantial gain of 19.2 percent. Additionally, the formation of the Pakistan Crypto Council indicates a growing interest in cryptocurrencies, marking a progressive shift in investment strategies.
As the market landscape shifts, investors must deliberate on how best to diversify their portfolios among gold, stocks, and cryptocurrencies. Investment banker Mustafa Fahim posits that both traditional and emerging assets should be incorporated into a diversified investment strategy. He emphasizes that time horizon, age, and risk tolerance should inform asset allocation choices. For young investors, he advocates for a substantial 60-70 percent investment in stocks, particularly index funds, which are expected to yield favorable returns due to their stability.
Shankar Talreja from Topline Securities expresses optimism regarding Pakistan equities and their potential for growth in the coming year. He highlights that the market is currently undervalued at an earnings multiple of 5.5x, suggesting an upside potential of about 27 percent with a possible total return of 35-40 percent when factoring in dividend yields. However, he advises caution concerning gold investments, suggesting lower returns in the future compared to previous years.
Research analyst Muhammad Usman Siddiqui reinforces the notion that gold serves as a secure investment, particularly during turbulent times. However, he asserts that stocks present a more advantageous opportunity in the current Pakistani market landscape due to their affordability and potential for high returns. Siddiqui recommends a balanced portfolio, with 50 percent allocated to gold and 40 percent to equities, while only a small portion should be invested in cryptocurrencies, which remain underdeveloped in local regulations. He highlights that blue-chip companies present a stable path in terms of earnings and revenue fluctuations.
The sentiment of smaller investors aligns with Siddiqui’s viewpoint, with many emphasizing the lower financial barrier for investing in stocks compared to gold. They observe that initial investments in stocks can begin with approximately Rs100,000, whereas gold requires significantly higher capital. Furthermore, there is widespread uncertainty surrounding the crypto market, and many potential investors await government regulation to facilitate legitimate transactions.
Fahim acknowledges gold’s stable nature but warns against over-reliance on it due to modest historical returns. He proposes prioritizing stock investments for long-term growth, with gold serving as a stabilizing asset and crypto positioned for high-risk engagement. He recommends Bitcoin for its longevity and reputation within the crypto sphere. Talreja concurs on the caution required when dealing in cryptocurrencies, emphasizing their volatility and regulatory lack.
While estimates suggest approximately 20 million crypto users exist in Pakistan, many experts question the authenticity of these figures due to the nature of engagement with cryptocurrencies primarily revolving around transactions rather than investments. Fahim cautions against equating the popularity of cryptocurrencies with investment habits in stocks, attributing widespread resistance to stock market participation to a lack of financial literacy and entrenched biases favoring gold and real estate.
In conclusion, while there exists a growing appetite for both traditional and modern investment avenues in Pakistan, pre-existing biases and knowledge deficits remain substantial barriers. As the financial landscape evolves, investors must make informed decisions based on their financial goals and risk propensity, with younger individuals encouraged to lean more towards equities for robust long-term growth, while older investors might consider safer avenues such as gold for retirement planning.
In summary, Pakistani investors face a dynamic marketplace characterized by the rising performance of stocks, gold, and an emerging interest in cryptocurrencies. Financial experts advocate significant allocations to stocks, particularly index funds, for long-term growth, while gold should serve as a stabilizing factor. As the nation gradually embraces the crypto landscape, prudent diversification, informed by individual risk appetites, becomes crucial for effective investment strategies.
Original Source: www.thenews.com.pk
