Dr Zeeshan Khan
Vacuum creates chaos, and chaos creates opportunity. Wars and geopolitical tensions are threats, but they also create openings for disciplined investors. History shows that those who invest wisely after analysing valuations emerge stronger, while those who follow tips, social media noise, and herd mentality often suffer losses.
Over the past three years, Pakistan has witnessed a remarkable surge in retail participation. Around 227,000 new accounts were opened as the KSE-100 Index touched euphoric highs near 191,000 points. Pakistan now has approximately 500,000 registered stock market investors — a major milestone. Yet, it is often observed that nearly 99% of new investors lose money. Why? Because they lack clarity on what to buy, when to sell, and, most importantly, when to hold.
The Pakistan Stock Exchange (PSX) has recently come under pressure. Regional tensions and political uncertainty have amplified volatility. In such environments, outcomes become uncertain and emotions dominate decision-making. The most practical advice during extreme volatility is simple: do nothing. Attempting to time the market during turbulent periods usually leads to unnecessary losses. For new entrants, gradual investment over several days rather than lump-sum deployment may be more prudent.
This is where value investing principles become essential. Warren Buffett’s philosophy centres on buying quality businesses at reasonable prices and staying calm during turbulence. Influenced by Benjamin Graham but evolved beyond deep-discount investing, Buffett emphasises intrinsic value, financial strength, capable management, and durable competitive advantages. His timeless quotes remain relevant: “Price is what you pay. Value is what you get,” and “Be fearful when others are greedy and greedy when others are fearful.”
Market corrections are not disasters; they are breathing spaces. Stocks go on sale when fear dominates. Emotional investors panic, while long-term investors find opportunity. Buffett welcomes declines because they allow him to accumulate strong businesses at attractive valuations. His approach is straightforward: stay calm, think long term, avoid timing the market, keep cash ready, and focus on business fundamentals rather than stock price movements. Volatility is not risk — overpaying is risk.
Similarly, Charlie Munger emphasised wisdom, patience, and rational decision-making. His mindset encourages continuous learning and avoiding stupidity rather than chasing brilliance.
Recently, the KSE-100 experienced one of its sharpest single-day declines after touching historic highs. Analysts quickly blamed foreign selling. Over the past six weeks, foreign corporates sold approximately $130 million worth of equities. However, domestic mutual funds absorbed roughly $140 million, indicating that liquidity did not disappear — it merely shifted hands. Foreign investors typically reduce exposure when US interest rates rise, political stability appears uncertain, or when target returns are achieved. This time, it appears to be a combination of these factors.
Additional concerns include Barrick’s security review of the Reko Diq project, global trade developments, political uncertainty, health concerns of key political figures, and pre-election balance-of-payments anxieties. Earnings from some heavyweight companies have not fully supported the rapid price appreciation, and long-term price-to-earnings ratios reached 8–9 times relatively quickly. Much of the rally was driven by liquidity-fuelled re-rating rather than strong earnings growth.
However, corrections of 7–15% are historically common even during strong bull markets. Globally, the S&P 500 corrects almost every year without necessarily entering a prolonged bear market. The difference between a correction and a collapse lies in macroeconomic fundamentals.
Currently, Pakistan’s macro foundation appears stronger than in previous cycles. Inflation has moderated significantly. Policy rates are expected to ease gradually. Industrial tariffs have been reduced, and export refinance facilities are supporting key sectors such as textiles. The currency has remained stable for nearly three years. Credit rating outlooks have improved. Remittances remain strong, and the State Bank’s foreign exchange reserves are trending upward. Growth projections suggest approximately 4% expansion in FY26 with ambitions of 5% in FY27 as the economy transitions from IMF-led stabilisation towards expansion. Structural reforms, including privatisation initiatives, further support long-term optimism.
That said, risks remain. Oil prices have risen amid geopolitical tensions. Security incidents have resurfaced. Relations with neighbouring countries remain fragile. Political uncertainty and potential unrest add to investor discomfort. These risks are real and markets price them quickly.
For investors uncomfortable with volatility, equity markets may not be suitable. A temporary 10–15% decline is normal in stocks. Those seeking stable 6–7% post-tax returns may prefer deposits or money market funds. However, higher returns require accepting higher volatility. Expecting daily or weekly profits reflects a flawed time horizon.
Sector rotation may occur as growth stabilises, shifting focus towards cyclical, growth, and high-beta stocks rather than traditional heavyweights. Stock selection becomes increasingly important. Earnings season has been mixed, and certain sectors have underperformed expectations. Ramzan seasonality, geopolitical developments, and monetary policy uncertainty may further influence short-term direction.
Nevertheless, long-term investors should maintain perspective. Corrections often provide the best opportunities to accumulate quality businesses at reasonable valuations. Investors should target longer-term milestones rather than reacting to daily fluctuations. Patience, discipline, and emotional control remain critical.
The Reko Diq project is particularly important for Pakistan’s long-term economic prospects. Barrick Mining Corporation’s security review following regional incidents highlights the need for robust security guarantees and consistent policy support. The project has the potential to generate significant long-term economic benefits. Ensuring stability, investor confidence, and execution capability is essential for sustained foreign investment inflows.
Ultimately, wealth is built slowly. Ironically, building wealth slowly is often the fastest sustainable method. Investors should maintain emergency funds covering six to twelve months of expenses, practise budgeting discipline, and avoid leverage. As outlined in The Simple Path to Wealth by JL Collins, the three fundamental rules are: eliminate debt, spend less than you earn, and consistently invest savings — ideally in diversified index funds or quality equity mutual funds.
The music of the market has not stopped. Corrections are pauses, not endings. Stay calm, stay disciplined, and focus on long-term value rather than short-term noise. Patience compounds wealth, and time in the market remains more powerful than timing the market.
The writer is a personal finance and financial literacy enthusiast with an investing experience in financial markets. He tweets @DrZeeshanKhanA1
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