'Ro­mance with eq­ui­ties'

The Pak Banker - - 4EDITORIAL - Nasir Ja­mal

MANY Pak­ista­nis have made it big in the in­ter­na­tional bank­ing and fi­nan­cial sec­tor. Ali Naqvi is one of them. Trained as an elec­tri­cal en­gi­neer from La­hore's Univer­sity of En­gi­neer­ing and Tech­nol­ogy (UET) in the early 1990s, he did not quite feel like mak­ing en­gi­neer­ing his ca­reer. Pak­istan, at that time, was open­ing up its mar­ket and dereg­u­lat­ing its econ­omy; a de­gree in business ad­min­is­tra­tion came in handy for any­one want­ing to land a well­pay­ing job. So he joined the La­hore Univer­sity of Man­age­ment Sciences (Lums) to get an MBA de­gree.

It was dur­ing his in­tern­ship at a firm in Karachi when he kind of fell in love with the eq­ui­ties mar­ket, join­ing a bro­ker­age company. "I had 6-7 of­fers at that time, but I chose the low­est-paid job," Ali told Dawn in an in­ter­view.

His ' ro­mance' with eq­ui­ties con­tin­ues to­day as the Head of Eq­ui­ties for Asia Pa­cific at Credit Suisse, the bank he had joined in the late 1990s. At Credit Suisse, he headed re­gional re­search and cash eq­ui­ties be­fore tak­ing over the bank's $1.5bn eq­ui­ties business in the re­gion in 2010.

'There is a per­cep­tion in the in­ter­na­tional mar­kets that Pak­istan's eco­nomic de­cline has stopped and the coun­try is headed to­wards eco­nomic sta­bil­ity, with its cor­po­rate sec­tor show­ing a strong growth of 12-16pc'

One of the most ac­tive for­eign in­vest­ment banks in Pak­istan, the bank helped the gov­ern­ment pri­va­tise the Kot Addu power plant in the 1990s and sell its resid­ual hold­ing in UBL for $387m in June last year. Now, it is work­ing on the gov­ern­ment's plan to dis­in­vest its re­main­ing stakes in Habib Bank in the in­ter­na­tional mar­ket - a deal that is ex­pected to take 4-6 months and fetch over $1bn.

Be­sides help­ing the gov­ern­ment im­ple­ment its pri­vati­sa­tion pro­gramme through cap­i­tal mar­ket trans­ac­tions, the bank also ar­ranged in­ter­na­tional syn­di­cated fi­nanc­ing in Novem­ber 2013 and March 2014 to shore up Pak­istan's for­eign ex­change re­serves to meet one of the IMF loan con­di­tions. "We have ar­ranged a (bal­ance of pay­ments) fi­nanc­ing of $372m for Pak­istan, which makes Credit Suisse the largest lender to the coun­try after the IMF," Ali laughed.

At the same time, the bank is also in­volved in lend­ing to com­pa­nies in the coun­try for the last 18 months. "So, we have dif­fer­ent lev­els of in­volve­ment in Pak­istan: we bring port­fo­lio in­vest­ment as well as work di­rectly with the gov­ern­ment and the cor­po­rate sec­tor," he noted. "Our in­volve­ment here has had an im­pact on the de­vel­op­ment of the coun­try's cap­i­tal mar­ket and in­ter­na­tional in­vestors' ap­petite for Pak­istani risk."

Ali con­sid­ers the UBL trans­ac­tion very im­por­tant for the coun­try. "It was the first block trade from Pak­istan for in­ter­na­tional in­vestors after a hia­tus of seven years, and the or­der book was over­sub­scribed. We ex­pect the deal to help re­open the in­ter­na­tional mar­ket for Pak­istan's fu­ture eq­uity is­suance as well as its pri­vati­sa­tion pro­gramme," he said.

The UBL deal has been de­clared the 'deal of the year' and Credit Suisse the best for­eign in­vest­ment bank in Pak­istan. "We must cel­e­brate our suc­cess. Th­ese awards will bring Pak­istan back on the radar of in­ter­na­tional in­vestors."

What makes the coun­try at­trac­tive to for­eign in­vestors? "There are mul­ti­ple rea­sons for in­ter­na­tional in­vestors' in­ter­est in Pak­istan. Emerg­ing mar­kets like China are un­der­per­form­ing and there aren't many op­por­tu­ni­ties to get good re­turns in the US and Europe owing to low in­ter­est rates and weak re­cov­ery. There­fore, in­vestors are mov­ing into high-risk fron­tier mar­kets like Pak­istan where they think bet­ter growth op­por­tu­ni­ties lie," Ali said.

"In ad­di­tion to th­ese fac­tors, there is also a per­cep­tion in the in­ter­na­tional mar­kets that Pak­istan's eco­nomic de­cline has stopped and the coun­try is headed to­wards eco­nomic sta­bil­ity, with its cor­po­rate sec­tor show­ing a strong growth of 12-16pc."

Nev­er­the­less, Ali said it would take some time and ef­fort be­fore for­eign di­rect in­vest­ment starts com­ing to Pak­istan. "FDI rep­re­sents a long-term com­mit­ment. We will have to im­prove our coun­try's per­cep­tion in the for­eign me­dia and en­sure pol­icy con­sis­tency and sta­bil­ity to woo FDI."

His ad­vice for pol­i­cy­mak­ers is to fa­cil­i­tate lo­cal in­vest­ment in the coun­try. No mat­ter how im­por­tant FDI can be in bring­ing new tech­nol­ogy and mod­ern business prac­tices, "lo­cal in­vest­ment can push eco­nomic growth much faster be­cause lo­cal in­vestors have a long-term and a big­ger stake in their coun­try. The gov­ern­ment needs to help 10-20 guys grow big and in­spire their coun­try­men to follow their ex­am­ple." He be­lieved that the slow­down in the emerg­ing mar­kets and the oil price slump has pro­vided Pak­istan a big op­por­tu­nity to re­vive the growth mo­men­tum. "Pak­istan is one of few coun­tries like the US and In­dia that will hugely ben­e­fit from low oil prices. It of­fers the coun­try an op­por­tu­nity to push growth much faster than it had ex­pected.

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