Will KSE-100 index touch 100k?

Lost within the noise of new International Monetary Fund (IMF) programme, political instability and tragic security incidents, is the case of Pakistan’s rising stock market. Very quietly – from its own standards – the KSE-100 index has increased nearly 75% from 40,000 points seen almost a year ago. This is increasing the confidence of a very small segment of society benefiting from the resurgence and some foreign investors as well. But is it as rosy as it seems? One must always begin discussion on the stock market with the true intrinsic valuation of the index. The most plausible and well-appreciated ratio in this case is the price-to-earnings (P/E) multiple – price being the market value of overall index constituents or the company divided by its earnings or profitability. Based on various estimates, the one-year forward P/E of KSE-100 still languishes near 4.3-4.5x, which is much lower than the last decade’s average of 8x. Does that mean there is more upside?