The dollar at 350 is not the end of the market

A $4.8 billion month and the return of the 350 rupee

The episode opens with Muzamil walking through the headline that has dominated the week: Pakistan is repaying the UAE’s $3.5 billion loan it first took in 1998, ending a long stretch in which the UAE simply rolled the debt over. In total, April demands $4.8 billion in debt obligations. Muzamil notes the obvious anxiety this creates around the foreign-exchange reserves, the rumoured Standard Chartered stop-gap of $2 billion, and the equally obvious problem with the rupee.

“Pakistan’s average devaluation for the dollar is 9% per year,” Muzamil reminds the audience. After two and a half years of holding the rupee artificially stable, the market is now pricing in a possible 22.5% correction — which would bring the dollar back to around 350 rupees. Add an oil shock from the Iran conflict on top of that, and the picture darkens further. The KSE-100, which had been flirting with 200,000 points just weeks earlier, is now hovering around 150,000.

To make sense of it, Muzamil brings in Laeeq Ahmed, founder and CEO of Sarmaaya, a guest who has now appeared on the show five times. The opening question is the right one: is this knee-jerk, or is it systemic.

Why the 2023 rally was a story about government strength

Laeeq’s answer reframes the entire question. Three years ago, he reminds Muzamil, Pakistan was on the brink of default with foreign-exchange reserves covering barely three weeks of imports. The IMF programme forced a strategy change. Subsidies came off. Petrol moved from 150 to over 200 rupees. The dollar climbed from 180 to around 280. Electricity, gas, transport and fuel bills all went through the roof.

The public’s instinct was to expect the stock market to fall with them. It did the opposite. “We were around 50,000 back in June 2023 and we went up to one ninety thousand just six-seven weeks ago,” Laeeq says. He attributes this inversion to a structural change in government behaviour. Before 2023, subsidies flowed to rich and poor alike — the man on a Honda 70 and the man in a Fortuner paid the same un-taxed petrol price. Once those subsidies came off, the state moved from weak to strong. Revenues climbed. Tax discipline tightened. And investors, who had refused to allocate to a country with broken fundamentals, began to allocate to one with companies that had always been performing well.

That, Laeeq argues, is the real lesson under all of this. “Earlier the companies were very good, their performance were very good, but the government was weak.” The 50,000 to 190,000 rally was the price catching up to a reality the equities had been carrying alone.

Adversity is where the next thesis lives

Muzamil pushes back gently on the binary instinct that grips public discourse during shocks like this — the sense that things are either fine or apocalyptic. He stakes out the position he has been repeating on the show: tough times are coming, and people should be cognisant of that, but adversity is when innovation happens.

He pulls in his own track record on EV interviews from five years ago, when comment sections would tell him to stop covering small EV makers and go back to Toyota, Honda, and resale value. “Today, if suddenly, there is, like, an economic opportunity where the customer is not forced to go to EV because of the fact that the fuel prices are so high that there is no economic viability there,” he says, “that EV is going to actually help us with our pollution. That EV is going to actually help us with our circular debt because it’s going to increase the demand on the grid as well.”

Laeeq agrees, and frames the larger principle in investor terms. He casts back to COVID, when the market crashed 40% and felt like the end of the world, only to recover and double from 100,000 to 190,000 in less than a year. The point is not market timing. The point is that the entire purpose of investing is to protect yourself from shocks you cannot see coming. Short-term liability money belongs in low-risk mutual funds. Anything beyond that is long-term equity. “You always need to plan for the next shock. We don’t know when the next shock will come.”

The dollar-up trade: who actually wins

Laeeq then walks through, sector by sector, exactly who benefits when the macro picture turns the way it is currently turning. The list is more counter-intuitive than the noise on television would suggest.

Refineries get the international rate locally, so they win as oil climbs. Oil and gas exploration companies bill OMCs in dollars, so they win on both oil price and rupee. Banks win when inflation peaks and interest rates climb. IT exporters earn in dollars and win on devaluation. Fertiliser companies are dollar-pegged on input pricing.

He returns later to the question Muzamil asks about why a devaluation should not be read as automatic bad news for the market. “60% of the Pakistan stock market, KSE-100 companies are dollar dependent,” Laeeq says. “Whenever the dollar goes up, their earnings goes up.” For the IT companies, the OGDCs, and the refineries, a 280 to 310 rupee move is a tailwind to the income statement, not a headwind.

The fifth lane he identifies is the EV and two-wheeler shift. He references BYD’s franchise where 100 cars sold in a week, Atlas Honda announcing capacity expansion on its newly cash-flow-positive electric two-wheelers, Sazgar taking five canals of new space, and the steady arrival of Nishat-backed Jaguar and Deepal models. Muzamil presses on whether there are listed pure-plays in solar. Laeeq is honest: there are none directly in solar, but Exide and Millat Tractors give exposure to the battery side, which he believes is the next big thing as households increasingly consider replacing grid-connected solar with battery-backed off-grid systems.

The export problem nobody is solving

Muzamil contributes news on local lithium-ion battery production, a planned half-billion-dollar Chinese collaboration announced in January, and Lucky’s partnership with a Chinese OEM on new energy vehicles. He asks Laeeq about Engro’s exposure to Thar coal, fertiliser, the chemicals business, and the recently acquired Jazz tower portfolio.

Laeeq’s answer about Engro pivots into the larger argument he has been circling around the whole conversation. Coal is not yet fully utilised. Cement, which still imports from Afghanistan along disrupted routes, could move to coal. But the deeper problem is structural, and it is not one that Engro alone can fix. Pakistan is a consumption-oriented economy. Lucky, Sazgar, and the rest of the Mansha group — including Jaiko, which Mian Mansha recently acquired — are taking Chinese brands, CKD-assembling them locally, and selling them to Pakistani consumers. The dollars come in. The dollars go out. The current account doesn’t move.

“What we need to do, we need to produce locally and then sell to the outside world, get more dollars,” Laeeq says. He flags Millat Tractors exploring exports into Africa as the kind of move the country needs more of. The current auto policy, which incentivises greenfield CKD assembly for domestic consumption, runs in the wrong direction. If the rupee continues to devalue, that very devaluation could finally make Pakistani manufacturers competitive on global markets — if the policy framework rewarded that competitiveness rather than the local sell-through.

Fertiliser, LNG, and the question of which plants are running

Muzamil presses on a specific risk he is hearing about: fertiliser companies are pegged to the dollar in price, but they depend on local gas. With shortages of LNG from Qatar reportedly forcing six plants offline and Agritech’s urea plant already shut down, the inelastic-demand thesis on fertiliser is more complicated than it looks.

Laeeq concedes he has not seen the specific news on LNG diversion. He frames the fertiliser sector’s profile from the balance sheet up: in the last five years he has not seen a single year where fertiliser companies failed to pay a dividend. Government subsidy historically backstops the sector because food security is a national priority. But Muzamil’s underlying point lands: the average investor cannot just hear “fertiliser is dollar-pegged” and allocate. They have to know which company has guaranteed gas, which plant is running, and which one is dark.

Karachi as a port, the muslim bloc, and the end of US primacy

The conversation widens. Muzamil makes the geopolitical case that Pakistan should drop the nationalist-versus-friend framing of regional countries and ask one question only: how does Pakistan benefit. He uses a concrete example — Karachi port is currently handling ten to fifteen times its normal traffic because ships can no longer dock safely in Doha or Dubai. Pakistan is the closest secure major port on that lane.

Laeeq builds on it. The 250 million Pakistanis at home are out-earned, in dollar terms, by the few hundred thousand sending remittances from abroad. That is the structural failure that has to be solved. Then he widens the lens further. The US has failed to protect its Middle East base hosts. Pakistan demonstrated, during the recent war with India, that a regional power can defend itself against a superpower-backed adversary. Pakistan remains the only nuclear-armed muslim state. The opportunity, in Laeeq’s reading, is for the muslim bloc to coordinate around that, not in exchange for another $20 billion loan to refill reserves, but as the basis for a real economic-partnership posture.

Muzamil adds further texture. The UAE produces 4% of the world’s aluminium. With the Strait of Hormuz at risk, that aluminium is not reaching buyers. Plastics, palletisation, and downstream packaging — all of which UAE centralised and re-exported across Africa and East Asia — are exposed. Pakistan already has the industrial base in most of these categories servicing its own market. A weaker rupee and a regional dislocation could, in theory, make those same factories globally competitive overnight.

The next three months

Toward the end of the conversation, Muzamil asks Laeeq for a hunch — not a prediction. Laeeq’s answer is direct. US debt has crossed forty trillion. The current war they expected to win in two days has run more than a month. He believes the US is losing its superpower status and that China is, increasingly, on the right side of history. Pakistan demonstrated Chinese defence technology in the recent India conflict. Iran is now using the same playbook, with reported F-15 losses.

For Pakistan domestically, Laeeq expects continued pressure on reserves and real pain for the poor. The data point he highlights is sobering: when oil moved from 260 rupees per litre to 310 rupees overnight, March consumption rose 24% versus February. The expected behavioural response — conserve — did not occur. Panic did.

“For the richer I don’t think there is any sort of change,” Laeeq says. “In last fifty years I have never seen a rich getting bankrupt or basically telling anyone that it’s so difficult to basically make money in Pakistan.” The takeaway he leaves for the audience is the cleanest distillation of the entire episode: the only way the average person can partner with the rich is by owning equity in the companies the rich own. A Sazgar does not need to sell 25 million units to re-rate; it needs to sell a thousand. The shareholder partners in that re-rating regardless of where the rupee is on any given day.

Closing: the BYD that arrived in Atlanta before America noticed

Muzamil closes from Atlanta, where he has been in the US for the last year between San Francisco, Seattle, and New York. He notes, with surprise, that the vibrance he experiences in Pakistan simply does not exist on US streets. He inverts an inherited mental model: growing up, Pakistanis were told that China was the country that closed itself off and the US was the country racing ahead. Today, he says, the situation looks reversed. There are no BYDs in America. There are no Chinese EVs at scale. Americans jump up and down about Tesla, but Muzamil — having driven a BYD just before leaving Karachi — says there is no comparison on anything except brand.

He runs the same comparison on solar. A 1,500-unit-per-month residential system in Pakistan, end-to-end with net metering, quoted at roughly 2 million rupees. A comparable 1,200-unit system in the US quoted at fifty to sixty thousand dollars. Same hardware. Same physics. Different price by an order of magnitude. Pakistan, he argues, sits next to the factory. There is no transit cost. There are no layers of distributor margin. The country’s structural opportunity is to industrialise on the back of energy that is cheaply available across the border, and to stop sulking through the shock instead of using it.

The conversation closes the way it opened — with Muzamil thanking Laeeq for the fifth time, and with an invitation to the audience to open a brokerage account, start a SIP, and let the next three months sort the serious investors from the spooked ones.