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Added: 2026-05-23

[00:00:08]A bill All also.

[00:00:32]Y in the name of Allah the most compassionate most merciful.

[00:00:54]Read. O prophet peace be upon him in the name of your Lord who created created humans from a clean cloth.

[00:01:08]Read and your Lord is the most generous who taught by the pen.

[00:01:16]Taught humanity what they knew not.

[00:01:30]Ladies and gentlemen, there is a slight change in today's proceedings until Mr. Ali Faraja and Mr. Wood gets here. Um, we'll now invite Mr. Aves Khan, otherwise known as Elvis, who is the managing director of global equity and macro sales in Dubai. uh Jeff to take over until they get here.

[00:01:59]>> I'm sorry to disappoint you all, but don't worry, Chris. He's definitely on his way. Um, want to thank you all for uh giving Chris uh and uh Jeffrey's this opportunity. I've been asked given the fact that they're stuck in traffic. um something I guess uh happens here uh quite often um for them uh I'm conveying their apologies and they've asked me to actually just talk about uh the global markets and way some shape and form which may interest you. So I work very closely with Chris. I do uh global macro and equities and I've been doing that for a long time. And I was uh thinking in terms of like what may interest you and I guess one of the things which has been interesting people is that we've got a geopolitical crisis which is affecting the world yet we've got the US market which is um at all-time highs. I was wondering if somebody wants an explanation for why that is the case or is that something which is a bit boring and we can go somewhere else. Would that be something which you're interested in?

[00:02:57]Yeah. So, US S&P all-time high and we've got a geopolitical crisis with oil which has gone from 60 uh to north of 100. Um, and yet the S&P is high is largely to do with something called passive funds. I don't know if you know what passive funds are but passive funds are essentially uh they've grown into now contributing towards 60% of the US trading volumes per month and passive funds are essentially linked to uh employment contributions you know like pensions we have pensions every month oh here you are Chris I was disappointing these guys trying to pretend to be Uh Ali, do you have a laptop?

[00:03:50]>> You mean in terms of presentation? Let me just find out. Well, you've got this.

[00:03:54]You've got this here.

[00:03:55]>> Okay.

[00:03:56]>> At least I It's in the back. So, you have to just talk about my spare.

[00:04:08]>> No, no, no. You come. You come. I was just to let you know what I was uh I was beginning to tell these guys about the US market and why it's at an alltime high and the advent of passive funds.

[00:04:21]>> So maybe we can start with that and then we can take it from there.

[00:04:28]How are you? Are you okay?

[00:04:31]And uh when he wants to move the presentation forward >> present you will know page or >> this is a present >> next try next.

[00:04:45]>> Okay.

[00:04:49]>> Yeah there's copy here.

[00:04:52]>> Yes. But I think before Chris starts firstly I'll um thank uh Saja for hosting this and for all the colleagues at CCP for coming here and I wanted to apologize for the delay. It took us longer from to come from Pindi and uh they had a lot of questions for Chris.

[00:05:11]So um I was telling Chris that when I told Shaman Sab that he is coming to Pakistan. So Chairman Sab said that he has read his book four times. So, so he he uh was uh very keen to invite Chris to come and speak over here. Um and I was telling Chris that this is this is special times for Pakistan. Um a on the capital market side, we seeing record numbers in terms of new investors coming to the market. Um we're also seeing record activity on the IPO side and within the IPO we are seeing record participation by investors. And of course a lot of this started um or got accelerated 12 months ago because 12 months ago what happened was in May of last year that Pakistan showed in its conflict with India that we have technology superiority over over India.

[00:06:03]You know when they attacked and they they thought that they have superior technology and that was the core of their strength but we proved that we actually have better technology for you >> and of course a hero of that conflict was the brother of chairman Sab. So so while his brother set up the acceleration for this um special times which we see in Pakistan now chairman Sab is doing the same thing in Pakistani capital markets. So, so I think given that this is special time for Pakistani capital markets, um um I welcome Chris to SP and he's no uh stranger to Pakistan. Um in the past, you know, whenever he has visited, he has been widely followed. His comments on Pakistan has been have been widely followed by global investors. So Chris, welcome to SECP and we look forward to hearing your views on what's happening on global markets. Thank you.

[00:06:55]>> Um thank you Alli. Is this is this can you hear me? Is this mic working?

[00:07:01]Is this working? I don't think it's working.

[00:07:04]>> It is working.

[00:07:05]>> Yeah.

[00:07:06]>> Can you adjust it a little?

[00:07:07]>> Hello. You sure it's working? I don't think it's working.

[00:07:11]>> No, it's not.

[00:07:12]>> This mic is not working.

[00:07:14]Um, is there another mic? No, I will start.

[00:07:25]Hopefully, we can get the mic working.

[00:07:27]I'm sorry to be uh late here.

[00:07:32]>> You need the microphone's not working.

[00:07:34]>> Yeah, >> there's no microphone here.

[00:07:37]>> Uh there's the other one.

[00:07:40]>> Hello. It's not working.

[00:07:43]>> The microphone's not Hello. Is it working?

[00:07:51]>> Okay. Hopefully you can hear me. the um I'm going to be running through I'll try and keep this relatively short as we we're so late but I'm going to run run through some charts and I'm going to start with the uh US situation and the global situation. So the first chart on this presentation is the VIX index which bas basically represents risk aversion in global stock markets and what you can see in this chart is the so-called VIX compared to previous episodes or crisis has so far >> Can you wear it?

[00:08:31]>> Yeah, I need to wear it.

[00:08:32]>> Yes, >> I can help you if you can come.

[00:08:42]Can you hear me now?

[00:08:43]>> Sorry for >> Hello. That's much better.

[00:08:47]A >> lot of feedback. So the VIX the VIX has risen hardly at all in this uh this time around compared to a year ago.

[00:08:55]>> Oh jeez. Let's try this >> when we had the ann Thank you. We had the announcement of the Trump tariffs.

[00:09:01]And the reason uh the reason there's been such a small gain in the VIX index and why markets have been so resilient is that everybody in most people in the markets have been assuming ever since this Iran crisis or war began that it any but that Trump was going to uh the term is taco. Uh Trump always chickens out. That was the term which is very popular in the US and so the markets have basically most of the time been trading on taco. That means if the if the if there is a deal and the situation is resolved a lot of that is already discounted in the US market.

[00:09:44]Whereas if this assumption proves wrong and the straits or moves is still closed in two months time then at some point we're going to have a big selloff in world stock markets particularly the US stock market. Uh so for now the most interesting development is that the bond market has started to behave negatively but the stock market is still acting like a deal is going to happen at any time. And frankly, like most other people in the markets, I've been assuming that Trump was going to tackle O2. But there again, I thought I never thought he was going to attack Iran in the first place because I couldn't understand. I thought it was a very risky move from for for himself domestically because attacking Iran while it suits the Israel agenda in my view is very risky domestically because all the polls show that the Americans are against the Iranian war.

[00:10:38]Um, the polling on the war is worse than at the worst point in the Vietnam War in the US. Meanwhile, Trump's polling on managing the American economy is at very low levels even though the US stock market is at an all-time high.

[00:10:55]So, clearly Brent crude oil has gone up a lot, but it can go up a lot more if the straits of muzz is still closed in two months time. and we aren't at a high enough level yet to cause demand destruction. In the big picture, this shows America has a huge dominance of world stock markets. My formal view is that America made an all-time peak as a percentage of world stock market capitalization at 67% in late uh December 2024. My guess for now is that is an all-time peak. That's a huge weighting of the world stock market index. China, the second biggest economy in the world, only has a 3% waiting. So my my my base case that that will represent an all-time peak is partly driven by the view doesn't mean that the US stock market has to collapse, but it does mean that the US dollar is probably going to is probably has entered a long-term downtrend, which is my base case. The next chart refer refers to the Msei World Stock Market Index X the US. So that's all markets excluding the US. And what this chart shows what this chart shows is that with last year we broke out of a trading range we'd been in since 2008. So that breakout out of a trading range is a positive signal for world stock markets XUS relative to the US. I'm going to jump over the couple of charts. So the reason the US dot market has done so well in the last 1015 years is clearly the dominance of big tech. These big tech franchises like Google, Facebook, they're not just they're not just dominant in the US.

[00:12:53]their global franchises. But this means the US stock market's gains have been very concentrated in the relatively few stocks and in the last three years is clearly being driven by the AI theme. So the four major hyperscalers which is Alphabet, Microsoft, Amazon and um what's I've had a mental blank on the fourth >> Nvidia. They're not Nvidia. Nvidian, the four hypers scalers account for an estimated 43% of the gains in the S&P 500 since the beginning of 2023 when this AI thematic entered markets. the signal for the AI theme to enter uh the US stock market in world markets or the catalyst was the Microsoft investment in open AI and that triggered um what I've been calling ever since the AI cap the AI arms race because these four big these four these big tech companies in the US when this AI story arrived with the emergence of o open AI and the AI language models. It triggered a decision on the part of these major companies to launch these massive investments. And the reason they did it was as much negative as positive. AI is the big next growth opportunity. But from the standpoint of a Facebook, a Microsoft, a Google, these are also a huge potential source of disruption.

[00:14:37]So what's been going on in the last three years is huge increases in cap capital spending by these big tech companies and um I've got a few the key chart on this is this one which shows the rise in capex and when we did this chart recently based on the latest earnings guidance by the four companies Microsoft Amazon Google and Facebook or what they call Facebook's now called Meta. We're looking at a projected 680 to700 billion US dollars of capex this year by these four companies. So this is enormous and um what's going on in reality these these major big tech companies in America in the last 10 years have all more the reason their stocks have done so well is because they had assetike business models and they were each in their own mog and they weren't competing directly with each other. That's that was the the situation until the beginning of 2023.

[00:15:41]Since then, what they've done is they're all converging on the same AI area and they're all spending a lot of money. So, they're basically uh exiting their moes. In fact, they're draining their moes because they're spending all the money and they had this huge amount of cash when they entered this situation. So, if you look at the next chart, this is four major hyperscalers. capex to revenue or operating cash flow. We're now projecting we see we've seen a huge increase in uh in capex relative to both revenues and operating cash flow. So that's why markets are beginning I emphasize only beginning to get concerned about whether they'll be able to earn a return on the capex. So actually the people who have really made the money in the stock market in this whole AI cycle so far is not the hyperscalers is not the people who are spending these vast sums of money. The people are making the money are what I call the AI picks and shovels. They're the people who are benefiting from the capex and that is the tech hardware sector, the semiconductors because that's what the hyperscalers are investing in. And that's why Nvidia in the first two or three years has been the most uh the most the best stock to own. And more recently, we've seen huge gains in the share prices of the world's of the opp oligopoly through the three companies who dominate DRA production globally.

[00:17:21]Two of them are in Korea and one in Taiwan.

[00:17:26]Meanwhile, my my base case is that you know AI will end up being the AI will is a very important technology. It's going to change a lot of things. But in my view the risk is it it becomes the opposite of what the internet economy was because the internet economy was very was turned out to be a winner takes all model where the people who there was a huge network effect for the dominant franchise. Best examples of that globally are Facebook and Google.

[00:18:00]Obviously search has been phenomenally successful business model for Google. So it's a winner takes all network effect in my view the risk on open AI is it's going to be more like an airline industry it's going to be very capex intensive and it's not clear what is the differentiating advantage of all these different uh AI business models so from the personal market standpoint we don't clearly have a clear winner it's a different story in the corporate market where I think you've got evidence of monetiz ization in AI is in the corporate market with anthropic. Of course, corporates are each going to want to have their own smaller language model with it with their own specific proprietary database tailor made for their own use because that's where I think you can make money in AI. But on the personal market, I'm skeptical. But what's been going on in the last few um what's been going on ever since Google launched its Gemini product you can see on this chart that while Open AI which was the dominant large language platform before Google launched about a year ago basically uh OpenAI has been losing market share to Google ever since.

[00:19:19]Meanwhile, the other interesting issue raised by um open AI is what's going to happen to software. So the real money in the terms of tech stocks since this AI story began has been made in the hardware particularly the semiconductor makers but we've had a big selloff in software. So many years ago about 2011 a famous S Silicon Valley uh venture capitalist said that software will eat the world. That turned out to be correct. Now the issue is whether AI will eat software.

[00:19:56]And as for the US economy, basically nearly 50% of the growth in the US economy last year and first quarter this year has been driven by AI capex.

[00:20:10]In the big picture, obviously the market focus is on the US stock market when it comes to AI, but in my view and the long-term winner in AI could turn out to be China, not the US.

[00:20:24]There's two things you need for AI. You need compute and you need energy. The US is ahead of China in compute but much less ahead than it used to be because the US in my view made a strategic error a few years ago when it's tried to stop the Chinese buying the American advanced semiconductors because that move was a a massive incentive for the Chinese to upgrade their semiconductor expertise. So they ceased to be reliant on the US and so obviously the Chinese were banned from buying the most advanced Nvidia chips for example. The signal or message coming out of Beijing in the last four or five months is they no longer want Nvidia chips precisely because they want to make sure they're self-reliant.

[00:21:15]Well, so while the US is ahead of China in compute, it's less ahead than it used to be. But on energy, China is massively ahead of the US. So this chart shows increases in power generation capacity in China and the US. The green lab bar is China. The blue bar is the US.

[00:21:41]So it's just ma it's just massive increase in capacity in China relative to the US. And the next chart shows the total electricity generation capacity between China and the US. And you can see China is way ahead. Why is China so far ahead? because China has done a brilliant job scaling up its uh electricity grid and utilizing um the most advanced battery storage technology where the key company is CL.

[00:22:16]And what that what that has meant in reality is that China has more or less solved the problem of renewable energy which is storage. And the word in China in the last two years has become clear that solar energy in China because of the economies of scale and the battery storage technology is cheaper than in coal. So that's a huge advantage.

[00:22:41]Another huge advantage China has is in socalled um rare earth or strategic metals where the Chinese have a more than 90% share of refining capacity.

[00:22:55]What this chart shows you is the decline inflationadjusted decline in the value of a US stockpile of critical materials since the end of the cold war. So the Chinese finally, they could have done this at any time in recent years, but they finally had decided last year to apply the leverage of strategic uh their grip on rare us as as a tactic be against the US trying to stop them by buying advanced semiconductors.

[00:23:31]So the US I think is now trying to do a deal where you know they will say to the Chinese we'll let you now buy our advanced uh semiconductors if you let us have total access to strategic your strategic materials but the the impression I'm getting which hasn't changed after last meeting last week's meeting between Trump and Z the impression I'm getting is the US has lost the opportunity to make that deal because the Chinese the Chinese want to emphasize reliance on semiconductors and obviously the interesting point from a military standpoint is the US military is dependent on a lot of these strategic materials Chinese imports to fight their wars.

[00:24:15]Our next chart is on the inflation. So the US inflation is finally beginning to pick up. So that is in response to the squeeze on commodity prices triggered by the straight software moves. The important point right now is that the most important market to follow in the world if you follow one uh one data point it should be the 10-year Treasury bond yield. um in the last week it's broken above the 4 and a.5% level the 10-year Treasury bond yield and that is the signal which it's been in a very narrow trading range over the past year we've just broken out on the 10-year said that if that if the bond yields continue to rise that is a pressure on Donald Trump to make a deal with Iran from a fiscal situation the US fiscal situation is not healthy.

[00:25:12]A very simple um way of looking at US fiscal situation is US net interest payments and entitlements as a percentage of total federal government receipts.

[00:25:24]Um they they peaked at 95.6% in the 12 months to January. That's total net interest payments as percentage of an endowment entitlements.

[00:25:38]That's like things like Medicare as percentage of total federal government receipts and they basically declined in the past 12 months to still very high 92.7%.

[00:25:50]So we've only had a marginal improvement. This is the chart. We've only had a marginal improvement in the fiscal situation despite a big increase in tariff revenues in America courtesy of Donald Trump's tariffs. He's now backing off the tariff agenda because the tariffs are unpopular with ordinary Americans because they um because obviously the it's Americans who pay the ordinary Americans who pay the cost of tariffs pay the price of cost of tariffs in terms of higher prices on the street.

[00:26:26]Meanwhile, the other point to be aware of on the US fiscal situation is that US the US debt is financed very much at the short end. So 85% of US Treasury debt insurance in the last 12 months has been 12 months or less maturity. So they're borrowing money at the short end. So for this reasons uh my view has been that we're in a structural bare market for G7 government bonds. We had a 40-year bull market in G7 government bonds, treasury bonds from 19 um 80 to 2020. That bond that bull market has ended and I also think we're in a structural decline in the US dollar.

[00:27:15]Um, I'm going to jump over.

[00:27:21]What time are we?

[00:27:24]I'm going to I'm not going to go on about the charts in Europe. Yeah, I'm going to jump to more charts relating more to China because I think that's more relevant for people here.

[00:27:37]So, I've got some charts here on Europe and Japan. Happy to answer questions.

[00:27:42]Well, I think the other important place apart from the US and the global economy is China. Um, but as I said earlier, the Chinese stock market, while it's the second biggest economy in the world, the Chinese stock market is only 63% of the global index. But the Chinese stock market is in my view has entered a new bull market.

[00:28:04]But in terms of the Chinese economy, we're still in the process of recovering.

[00:28:13]We're still in the process of recovering from the move into deflation, the decline in the housing market, all of which was made worse by the um by the lockdowns during the pandemic.

[00:28:29]So if you look at household consumption as a percentage of GDP in China, you can see um consumption is still running at a very relatively low level. So President Zingping is committed to boosting the role of consumption in the Chinese economy. On a 10 20 year view, that's going to mean growing consumption of services, not goods.

[00:28:57]um service consumption expenditure rose by 4.5% year on year in 2025.

[00:29:06]So consumption is growing but it's uh it's isn't hardly booming. Meanwhile, we've had a dramatic collapse in the importance of the property market.

[00:29:17]How do I go backwards on this?

[00:29:21]Yeah, that's construction and real estate sectors as we're senator of GDP.

[00:29:26]you've had a dramatic collapse in the uh importance of property in the Chinese economy that was made worse by the pandemic. But actually part of this was deliberate government policy on the part of President Z. He thought the property market was too dominated by real the economy was too dominated by real estate real estate investment. His slogan, President Z slogan in recent years has been to boost new productive forces.

[00:29:54]What does that mean? And that means pursuing development of high-tech sectors like AI robots and and it means China being self-reliant in all these technological sectors. So part of this collapse in real estate market is induced by the Chinese government. However, the interesting point in the major cities like Beijing, Shanghai, uh prices are down 30 40% from the peak, but we have do not have a negative equity mortgage debt crisis. Any other country in the world with price declines in major cities that much should have a mortgage debt crisis. The reason you don't know that in China up yet, and I don't believe you will get it, is because loan to value ratios even at the peak of the property boom in China were not over 50%. Initial evidence is that um initial evidence is that property markets beginning to bottom in the bigger cities. Meanwhile, we've got the same IAI story in China as you have in the US, but the difference is the Chinese are spending much less money on the capex. So I said earlier the four hyperscalers are projected to spend about 700 billion US on capex this year.

[00:31:07]China's AI capex budget is uh currently going to be 70 billion US this year. So they're spending much less money more efficiently. They got this big advantage in energy. That's why I I back the Chinese to prevail to be very formidable competitors to the US on AI.

[00:31:30]China is also um going to become a tech player. This is uh exports of semiconductors in China which are rising sharply. These are more these are not of the most advanced areas of semiconductors but the Chinese are making strides in semiconductors and it's a matter of time before they're competing with the best players in DRAM.

[00:31:54]China is known for exports of goods but you can see exports of digitally delivered services in China are now ser surging part of that is AI related Chinese exporting tokens so 48% of China's total exports of services are are now digitally delivered services meanwhile China remains the dominant winner in manufactured goods in terms of being the do dominant leader in manufacturing of goods. This is China's soaring trade surplus.

[00:32:34]And the other interesting point in recent years, Chinese exports have been increasingly glowing to what people call the global south. So the share of exports of the G7 going down, share of exports to global south keeps rising and net exports are the biggest driver of GDP growth in China. What about the R&B?

[00:32:57]The currency in my view the uh they've started to let the currency appreciate again. My medium-term target on the remnant B is that we get to five against the dollar.

[00:33:10]And you can see year to date we're um you can see where you know we're in my view the target R&B dollar will be 5%.

[00:33:23]So basically China remains in a very resilient situation. Um we've just moved out of deflation and in my view the worst of the property downturn is over.

[00:33:38]I'll show you one chart, brief chart on the boom in semiconductor stocks. Two of the three world's dominant DRAM producers are in Korea.

[00:33:52]And this shows you the remarkable uh rally we've had in Korea. This is the performance of the Korean market relative to other Asian markets.

[00:34:03]And this shows you Highix is one of the DRAM producers relative to the Asian index. So the biggest beneficiaries of this whole AI story as I said earlier are the hard tech hardware companies.

[00:34:18]So what's going on is all this capex you're seeing spent by the DRAM by the hyperscalers is going directly into the pockets of Nvidia and the the DRAM producers.

[00:34:33]I think the other big development in the last few years in terms of global markets has been um the rally in gold which picked which which accelerated late last year early this year.

[00:34:52]Um, and in my view, gold remains in a long-term bull market, though I think we've entered in the last few months a period of consolidation.

[00:35:02]So, yeah, this is this is the chart showing gold gold bullion price and gold mining stocks. You can see big gains in the last 18 months, three years. Um, but we didn't make a new high on gold when the Iran war commenced and that Iran when the attack on Iran was a surprise to most people in the markets, but gold did not make a new high. So that was a signal that we're entering a consolidation period for gold. And I've my my trading range on gold in this consolidation period is the top of the range 5,500 bottom of the range 3,800 4,000.

[00:35:48]But the trigger for this gold rally was seen in the last few years. It's was clearly the uh outbreak of the Ukraine war and the decision on the part of the US and other G7 countries to freeze Russia's foreign exchange reserves. So what you see in this chart here is central bank net buying of gold and you can see that net buying of gold suddenly surged in early 23 and that that that was buying by of central banks outside G7 buying gold because people were shocked by the freezing of Russia's foreign exchange reserves and they countries globally thought well if it happened to the Russians it can happen to us and you'll ongoing buying by central banks of go by gold ever since. So the reality is is that the world is moving in not the world is not in a formal gold standard but the world is moving into a de facto gold standard which is best reflected in this chart because at current gold prices world central banks own more gold than they own US treasury bonds as you can see in this chart.

[00:37:09]And the other interesting uh related development is the share of world foreign exchange reserves.

[00:37:21]So gold now accounts for around 25% of central bank's official reserves up from 10% in 2018 and and is now bigger than the euro and the share of the dollar while remaining largest has declined significantly.

[00:37:40]So gold in my view remains in a long-term bull market. But I think I'll uh stop there. Yeah. Happy to answer any questions if there's time or people have them.

[00:37:58]>> Why don't you have a seat over there?

[00:37:59]>> Hello.

[00:38:00]>> And um >> is it working?

[00:38:02]>> My colleague will moderate for questions and uh firstly thank you so much for that insightful presentation. There were three points which I thought were really uh important for me.

[00:38:12]>> Does it work?

[00:40:32]on the last I think I saw that we have already moved to a de facto and there's no political it's easier to move in a de facto rather than somebody coming with the hammer and say that shows that thank you for that.

[00:41:29]That's a good summary. Very good. Very good summary. Thanks.

[00:41:40]important security.

[00:41:43]So with the issues that also had I mean most of the global funds being concentrated in um I would say uh you know AI and US driven uh you know equities I mean how do you see basically you know emerging markets and markets like Pakistan still being available you know by the global fund management community.

[00:42:04]>> Oh well that's a that's a very uh on the point question. Bizarrely, emerging markets have um outperformed last year and actually are doing well.

[00:42:18]But it's a little bit deceptive because what's happened in emerging markets is that uh we've had a sudden two of two of these DRAM stocks actually the third one is Micron which is US listed but two of the DRM stocks Micron sorry Samsung and Heinix um are are technically part of emerging markets because they're in Korea and the other very important stock is TSMC seed, which is a dominant foundry in Taiwan.

[00:42:52]And as a result, because these stocks have had these literally, particularly the green stocks have had these enormous moves, um, as of last week, these three stocks now account for 27% of the global emerging market index.

[00:43:10]So but from 2010 to you know for the last 15 years we've had very big concentration in the US of a few stocks dominating but actually it's not healthy right now because the um can we get to that chart it's not healthy because the um emerging markets are now dominated by three stocks. So emerging markets used to be about uh consumption in developing countries.

[00:43:39]Um but right now it's dominated by these three stocks.

[00:43:44]So that last is not healthy for emerging markets. Um you but people in this audience will be probably happy to learn that the biggest loser out of this has been India because India was the dominant Yeah, this is the chart. Um, TSMC, Samsung and Highix as percentage of MSEI emerging markets. You can see the it was never concentrated like that before.

[00:44:12]So this year what's happened is you're a fund manager managing an emerging market global index. You've had to chase the surging percentage rising neutral waitings of Korea and Taiwan.

[00:44:26]And India is the biggest loser because it's the had a lot of it's the biggest of domestic economy story in emerging markets and foreigners have big positions there. So last year foreigners there was net selling of 18.5 billion US dollars in the Indian stock market by foreigners.

[00:44:46]This year even up till a week ago they've already sold a net 22.5 billion US dollars. These are huge numbers, but it reflects the fact that the the profits being imported by Samsung and Highix are so enormous, they have to chase these stocks. And this so I worked it out the other day that the com the predicted profits of Samsung and Heinix this year are three times the total forecast profits of a major Indian benchmark called the Nifty50. 50 top stocks in India three times on the frontier markets. I'm very keen on frontier markets as an asset class.

[00:45:30]The problem is I'm about the only person who's keen on frontier because global institutions have only allocated about is it five six billion dollars to invest in the frontier asset class because they've all all these big institutions have a lot of money allocated to p so-called private equity private credit.

[00:45:55]>> Does anyone else have any questions?

[00:45:58]So hopefully Chris um given the fact that you are positive on Frontier Market, I'm sure you'll be able to convince some of that capital to flow back into Frontier Market and also flow to Pakistan. I I have a question. Um you have been looking at Pakistan for for many many years now. Um and you have seen a change, you have seen various cycles. Um when um CLSA came in, you you came at that time as well. Um and you have been following the market. any anything which you any change which you notice and any advice for Pakistan in terms of how can we go back to emerging markets index and how can we attract more foreign investors?

[00:46:40]>> Well, I think I foreigners have been coming back into Pakistan last two or three years with the macro stabilization.

[00:46:46]So on the most important thing is frankly that people start wanting to invest in frontier markets again. That would be huge um or indeed in emerging markets. Um and for that to really happen you need the uh institutions to stop right in the last 10 years everybody's wanted to invest in what is what they call the private markets private equity private credit. I'm talking about on a global stage particularly in the US in my view private equity private credit is the big bubble globally particularly in the US and I believe all these big institutions endowments will end up losing a lot of money private equity private credit the whole approach of investing private will be discredited and then you'll get flows back but in the short term I think a very important very positive thing for Pakistan which is a which is something I haven't seen before is Pakistan's profile globally has just increased dramatically in the last uh what two months since but with Pakistan's clearly playing the critical intermediary role in these negotiations.

[00:47:57]So if those negotiations can be resolved positively, which has got to be at least a 50% chance, my guess is better than 50% chance, then I think that just dramatically increases Pakistan's profile globally and creates a huge opportunity for the Pakistan's economy to take advantage of it because it will reduce the uh the the perceived risk factor of Pakistan and it also will create actually opportunities is on the ground because um the the Gulf states are never going to the whole Gulf States status quo is never going to be the same as it was before. So I think there's huge advantages if Pakistan can play a good intermediary role and preserve this balancing act between the two dominant powers obviously US and China.

[00:48:53]Thank you for that and certainly we are very proud and um thankful to our leadership government leadership who is playing this role at such a critical point time in the world which the world has and they are uh working as a trusted mediator trying to solve a global uh crisis. So we as Pakistanis are indeed very proud of that and thankful for the leadership and I agree with you that that has created a massive opportunity for Pakistan. Um and I hope Chris that at one point like I remember um a few years back in your model portfolio there used to be an allocation for Pakistan and I don't see that now and I hope that you know these changes and your visit and your meetings could convince you to to again put Pakistan back on your model portfolio.

[00:49:40]>> I remember that.

[00:49:42]>> Good point.

[00:49:45]>> Do we have more questions? anything?

[00:49:48]>> If not, I'll have another question. Uh, Chris, what about crypto and Bitcoin?

[00:49:53]You mentioned the bubbles in private credit and private equity. Um, no, I don't think Bitcoin's a bubble. No, the um Hang on. I'm going to I actually did have Bitcoin in my global equity portfolio.

[00:50:07]Was that um I removed it in December actually, partly uh for two reasons.

[00:50:13]One, I was Sorry, I'm just going to Where's the Bitcoin? Here it is. This is Bitcoin. Yeah. So, I've had an allocation to Bitcoin as an alternative to gold since 2020 because in my I viewed Bitcoin I viewed Bitcoin as a digital alternative to gold because I want to these are the hedges on what I call US dollar debasement.

[00:50:35]Um, but I and that work that works.

[00:50:39]Bitcoin went up a lot since 2020.

[00:50:42]But I I removed girl Bitcoin for two or three reasons in December once because Bitcoin so far I'm assuming Bitcoin's traded around a four-year cycle based on the h havinging the people who follow Bitcoin will know this and um basically looks like the the four-year h havinging cycle peaked last October at a lower Bitcoin price than I was expecting about $120.

[00:51:08]So if the fouryear cycle follows its normal pattern, Bitcoin should bottom about a year after repeat. If it follows its normal pattern, Bitcoin could trade down to 35 40,000 where we were just under 80,000 today.

[00:51:24]So that is that is a clear risk. But the second thing which has made me a bit more nervous about Bitcoin is that in the last few months the Bitcoin community is being engaged in a debate about what they should do to address the potentially existential risk from the arrival of quantum computing because uh quantum computing if it ever actually really arrived that could potentially disrupt the whole Bitcoin model. And there was some evidence of what they call the whales, the big holders of Bitcoin starting to sell. So given the fact that my key reason for owning Bitcoin was as a store of value, any existential risk like that, even if it may only be five years away is a risk because I don't have in my view I don't have that existential risk with gold.

[00:52:14]>> Thank you. I think this is an important point for my colleagues at SECP.

[00:52:18]Although we don't look at this asset class and there's a separate regulator but as Chris said that there's a high probability of a risk that once quantum computers are operational and they might be operational in three four five years then the whole encryption model of bitcoin can be hacked which means that the whole product can go down potentially go down to zero. So the so the bitcoin community though is engaged in this but one of the solutions involves burning some of the existing coins which kind of in a way beat the problem >> but I think blockchain technology you know Ethereum will go up in if more and more people use the Ethereum network that will uh that will be long-term positive. So I'm not dismissing the whole thing. I just don't think yeah I think the easy money's been made in Bitcoin. That's what I was really saying.

[00:53:13]>> So I just wanted my colleagues to be aware of that so that when you engage on on Para or when you speak with people on your counterparts on crypto please do raise this as well because I've not seen that in the debates in Pakistan. Chris I know my colleagues have waited a long time so and uh for a long time but I have one final question. you have been a China observer and for a very very long time you've written books, articles on China and I think there are very few people who understand China as well as you do. Um given the fact that you are also bullish on China in in terms of market any advice on what Pakistan can do to attract more capital from that market. uh recently we had an IPO of a Chinese joint venture um it and it's called service long march and that IPO was 17 times overs subscribed and as you also know that Pakistan stock market has strategic links uh with the Chinese stock exchanges so what can we do as a country to uh strengthen these relationships and attract more capital from China >> yeah well so originally the the belton road was all about upgrade creating the infrastructure, right? So that happens.

[00:54:25]So obviously the next stage is you want to see concrete Chinese investment and the the kind of joint venture we just discussed. So that that's a huge opportunity. If the Chinese think there's a return, the Chinese will be here. But are there many examples of those joint ventures?

[00:54:41]Uh I think this is the biggest success story and certainly I think we would celebrate this because you know deserves to be celebrated and I'm sure that their success will encourage more companies to also come and enlist and um and hopefully Pakistan stock exchange itself would be a success story and our prime minister is going to China with a massive delegation on the 23rd so in two days time so hopefully there'll be more positive news. Chris with that I wanted to thank you and thank you for my colleagues who are attending this session and I think uh I would request um my fellow commissioner Mr. Jad heda he's the senior most commissioner he has been a commissioner at securities and exchange commission uh also in 2012 which I think was one of the best times for the capital markets in terms of the reforms which were done in this organization now he's leads the sec specialized companies division which deals with all the mutual funds all the non-bank financial companies sir can I request you to also say some words on the stage Uh so on behalf of security and uh the colleagues and officers and colleagues who have the privilege to attend this uh session. So on their behalf I'm heartfully grateful to you and offer my gratitude for uh sharing very generously your knowledge and expertise with us.

[00:56:36]So we understand that uh your insight of the markets was not only informative but I think it's a inspirational aspect and we understand that uh it would have lasting impression on my uh colleagues and time and the effort that you have invested for preparing and releasing this uh effort although it has been contained and it this uh limit time I understand that uh it's deeply appreciated by all my colleagues here.

[00:57:14]uh I understand that all my colleagues would uh uh greatly benefit from uh the valuable knowledge that is shared with us and we understand that it will not only help in our professional endeavor but at the same time it would also uh be uh helpful in the work that we do at so once again thank you very much for being with us and u I'm thankful for uh your dedicated generosity and the commitment for the professional development and we hope that uh we have the honor to have a continued uh support and association with you in future. Thank you very much.

[00:58:12]Maybe also you know your mind Thank you.

[00:59:31]Ladies and gentlemen, that brings us to the conclusion master.