JP Morgan to re-open equity brokerage in Pakistan

JP Morgan is planning to re-open its equity business in Pakistan, the first foreign brokerage to return since they abandoned the South Asian nation in the early 2000s, sources familiar with the development said.

The No.3 US bank shut its Pakistan equity broking arm five years ago as part of a consolidation plan. “JPMorgan will be opening an equity platform in Pakistan along with equity and economic research,” said a market source with knowledge of the development.

“A decision in this regard has been taken, and the bank will start operations hopefully in January,” said the source, who declined to be identified. JPMorgan closed its equity broking business in Pakistan in 2001 saying at the time it did “not have sufficient scale in equity broking to maintain a sound business franchise”. It continued its position in investment banking.

Pakistan’s financial market has seen revitalised foreign interest in recent months. Last month, Asia-focused Standard Chartered completed the $487 million purchase of a 95.37 per cent stake in Union Bank Ltd – the biggest buy yet by a foreign bank in Pakistan.

This month, Dutch bank ABN AMRO started a due diligence review of mid-sized Pakistani lender Prime Bank. According to bankers, Britain’s Barclays Plc, Singapore’s Temasek Holdings and HSBC are also exploring possibilities.

Another source familiar with JPMorgan’s plans said the US bank would set up sales and research operations. “It will be the biggest international bank presence in the equity market in Pakistan,” he said.

Analysts said JP Morgan’s decision was testimony to the rising Pakistan risk appetite of foreign institutional investors. They said rising foreign portfolio investment in Pakistan in recent years, and the recent success of MCB Bank’s global depositary receipts (GDR) issue, also showed foreign interest in Pakistan was rising.

In the fiscal year ending on June 30, foreign portfolio investment to Pakistan stood at $351.5 million, compared with a net outflow of $27.7 million in 2003-04. MCB Bank, Pakistan’s second-largest listed bank, raised $150 million last week by issuing GDRs in London. A senior government official said the return of JPMorgan to Pakistan would be a significant move, and added that more foreign brokerage houses were likely to follow.

Source: The News