- Short-term commercial debt at high cost threatens long-term growth and financial sustainability
Interview with Mr. Sanie Khan, Capital Market Expert & Corporate Advisor
PAGE: Tell me something about yourself:
Sanie Khan: With over 25 years of hands-on experience in Pakistan’s capital markets, I have served in key leadership roles, including a 22-year tenure at the Pakistan Stock Exchange (PSX). Post-PSX, I transitioned into the corporate sector, where I currently serve on the boards of LSE Finance, HMR RMC, NETs International, and Borderless Technology Solutions. My expertise spans index construction, reverse mergers & acquisitions, and financial advisory services, making me a recognized authority in Pakistan’s financial landscape.
PAGE: The KSE-100 index crossed 136,000 points — an unprecedented high. What is your standpoint?
Sanie Khan: While crossing 136,000 (or even 140,000) points appears impressive, it misrepresents ground realities. Our market has only 523 listed companies, with over 140 on the default counter. The KSE-100 is constructed using a sectoral methodology, where the top company from each of the 35+ sectors is selected. Due to limited listings, some sectors have just 1-2 companies, forcing the inclusion of weak performers and making the index vulnerable and unrepresentative. Additionally, the KSE-100 is a total return index, yet PSX halts trading based on another index (non-total return). While PSX recently launched a new KSE-100 variant (non-total return), it has not yet adopted it as the primary benchmark.
My recommendation: PSX must engage MSCI or Ideal Ratings to redesign the index. During my tenure, I presented Pakistan’s case for MSCI Emerging Markets reclassification and tried engaging MSCI for our index construction: but was told our market lacks depth and is overly reliant on leverage, making a Pakistan-specific index unfeasible for global players. Conclusion: The index needs urgent structural reform to reflect true market health.
PAGE: What is your standpoint on expectations of robust financial results and dividend payouts this earnings season?
Sanie Khan: The non-default listed companies are performing well, with dividend yields often surpassing interest rates and inflation. For investors, dividend-yielding stocks remain a prudent choice in this climate.
PAGE: What is the role of falling inflation, monetary easing, a stable rupee, $14B+ reserves, and improved remittances/exports in PSX’s performance?
Sanie Khan: These factors have boosted sentiment, but challenges persist. While reserves exceed $20B, we’ve entered dangerous territory by relying on short-term commercial debt at high rates. This is unsustainable — long-term concessional loans from multilateral agencies (e.g., IMF, World Bank) are critical. Short-term debt stifles growth.
PAGE: Analysts anticipate further index gains. Your perspective?
Sanie Khan: The index could reach 160,000 this year, as stock prices adjust to the USD rate of 280. However, this rally is narrowly driven — just 5 circular debt-related stocks seems to have contributed 45,000 points. Many investors are left questioning: Will stocks, other than these 5 circular debt, 2-4 banks and Mari will sustain these levels? Caution is warranted.