- With historic P/E highs of 19 and 9pc dividend yield — one of the most attractive in Asia
Interview with Mr. Sanie Khan — Capital Market Practitioner
PAGE: How does our market compare with its own past and with giants like India’s $4 trillion and the US’s $40 trillion markets?
Sanie Khan: To assess financial markets quantitatively, markets are measured by size, reach, breadth, liquidity, and market depth.
One key metric for evaluating a stock market’s performance over time is market capitalisation. On May 25, 2017, when the KSE-100 Index was at 53,124 points, our market capitalisation was around $100 billion, and Pakistan was in the MSCI Emerging Markets category. However, despite the Index exceeding 53,100 points, our market was downgraded to Frontier Markets due to a drop in market capitalization — highlighting the unique way our Index was managed.
By January 5, 2025, even with the Index reaching a record 118,735 points, market capitalisation had fallen to under $50 billion. Valuation ratios are another important measure of market performance. Globally, three key ratios are used: the price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, and the dividend yield. Back in 1995, while working on a freelance project for a PSX member, I witnessed our market achieving a P/E multiple of 19 — the highest in its history. Thirty years later, our market P/E stands at just 5.5, the P/B ratio is 1, with over 150 companies on the default counter and more than 125 companies trading below their book value. Our dividend yield is around 9%, reflecting significant market undervaluation.
Unfortunately, our valuation ratios have been on a downward trajectory for the past three decades. When comparing our market with international and regional peers, the contrast is stark. Our market capitalisation is approximately $49 billion, whereas India’s market cap is $4 trillion, and the US market cap is about $40 trillion. While India’s population is seven times ours, its market capitalisation is 100 times larger. We aren’t even close to a single Indian corporate giant like Reliance, which alone has a market cap of $220 billion.
Consider our flagship company, OGDC. At a time when the US dollar was below Pak rupee 60, OGDC’s share price surpassed PKR 180, equating to over $3 per share. Realistically, when do you expect to see OGDC’s price return to $3 again? Our capital market’s journey has been the complete opposite of India’s — while they ascended rapidly, we declined just as fast.
PAGE: How does the reach of Pakistani capital market compare with itself and region?
Sanie Khan: Our stock market has approximately 325,000 active account holders, while several individual brokers in India manage over a million active accounts each. India, overall, has around 100 million active stock market account holders. In Pakistan, only 0.1% of the population participates in the capital market, compared to 7% in India and 50% in the US. In the US, this widespread participation acts as a strong deterrent against market misconduct, as public scrutiny is immediate.
A glimpse of what happens in a well-participated market was seen during the infamous March 2005 crash at PSX. When the KSE-100 Index dropped sharply by 3,000 points, wiping out 25% of market value, frustrated investors stormed the exchange, breaking windows and doors, and entering the PSX administration offices. This incident underlined the power of a broad investor base in holding markets accountable. Additionally, the mutual fund AUM to bank deposit ratio in Pakistan is just about 8%, whereas it is 30% in India.
PAGE: How the breadth of our market compare with its peers and the US?
Sanie Khan: Our market’s product base is not comparable to its peers or the US. Sixty per cent of our trading volume comes from DFM and MTS. We are the only market globally with equity deliverable futures. Historically, our market has achieved a P/E ratio of 19 and a billion dollars in daily trading value. Until the late 1990s, our product offerings were on par with India, with both markets heavily reliant on BADLA. While India phased out BADLA and introduced options, enabling investors to hedge their portfolios and open positions to manage risk, we continued to rebrand BADLA under different names — CFS, CFS-MKII, MFS, and MTS.
Even finance ministers took pride in launching new variants of BADLA. Today, compared to India and the US, we lack risk-averse products and a robust debt market to attract conservative investors.
PAGE: How does our market depth compare with its peers?
Sanie Khan: Market capitalisations are usually equal to or higher than a country’s GDP. In 2007, Pakistan’s market cap peaked at 50% of GDP. However, in 2024-2025, it is only 10%, while in India and the US, market caps are much higher than their GDPs.
PAGE: How does our market’s liquidity compare with India?
Sanie Khan: In the 1990s, the entire free float of the Pakistan Stock Exchange (PSX) would trade over 300 times within a six-month or yearly review period, resulting in an Annualised Traded Value Ratio (ATVR) of 3.75.
In contrast, India’s ATVR has consistently remained below 1, and currently, it is around 0.27, compared to PSX’s 0.05. This is despite India discontinuing its traditional leverage product, BADLA, while PSX continues to utilise an updated version of BADLA, which is considered a strong liquidity generator.
PAGE: Journey in Capital Markets: Can you share your professional journey and what drew you to the capital markets?
Sanie Khan: My entry into the capital markets was quite accidental. Back in 1995-96, while doing freelance IT work for Anas Kapadia, a well-known broker, I first visited the Karachi Stock Exchange building. The advanced technology and dynamic environment intrigued me. I hold a Diploma in Computer Science from the Ministry of Production (1993) and an MBA in MIS, initially aiming for an IT career. However, my exposure to the financial sector, particularly during my time with Unisys Pakistan and projects at HBL and MCB, shifted my focus. When Shaukat Aziz became Prime Minister, I saw the potential in financial technologies and pursued a Master’s in Economics in 2007, solidifying my career path in the capital markets.
PAGE: As a former General Manager at PSX, what key initiatives did you work on that directly impacted retail investors?
Sanie Khan: I am humbled and grateful for the opportunity to contribute to Pakistan’s capital markets. At PSX, I led key initiatives that laid the foundation for long-term market development. I developed Pakistan’s first-ever market-making regulations, helping enhance liquidity for both debt and equity products. I introduced Stock Index Futures and Single Stock Cash-Settled Futures Trading, pioneered the KMI index to promote Islamic finance, and obtained SBP’s approval for T-bills and debt market trading, earning recognition from the Finance Minister.
On the risk management side, I implemented Pakistan’s first online risk management system, preventing brokers from exceeding capital adequacy limits. I also contributed to over two dozen committees of the SECP, SBP, and Ministry of Finance, including the 2008 market crash probe. I believe reviving certain products and implementing the 2008 crash report’s recommendations could significantly boost market participation and stability.