KARACHI: The Hong-Kong based CLSA, the CITIC Securities Company, entered into a joint venture with Bank Alfalah today, to buy a 24.9 per cent stake in their securities unit. This also marks Credit Lyonnais Securities Asia’s (CLSA) return to Pakistan after almost two decades.
The deal is backed by the World Bank’s International Finance Corporation that partnered with Bank Alfalah in 2014 and holds about a 15 per cent stake in it. CLSA had exited from Pakistan in 2001 owing to the constant instability in the economic state of the country. Explaining the reasons as to why CLSA chose to return to Pakistan now, CLSA Group Secretary Donald Skinner said that CLSA is Asian at its core, and the only two countries where they did not have a foothold were Bangladesh and Pakistan.
“Since we claim to provide the best investment information on Asia, it was a big hole in our portfolio,” he said, adding “We have had business here but we did not have as major a foothold as we would like.”
The CITIC securities company might have already found a foothold in Bangladesh. Earlier this year, CLSA supported the acquisition of a 25 per cent stake in the Dhaka Stock Exchange by the Shanghai and Shenzhen stock exchanges.
Answering to a question whether CLSA made its decision to return based on the new government in the country, Donald said, “When we decided to have this conversation with Bank Alfalah, Imran Khan becoming the prime minister was a very farfetched idea. We hoped to work with any government.” He also said that ‘One Belt, One Road’ initiative was a greater influence on CLSA coming back to Pakistan.
The joint venture will be chaired by the former CEO of the local unit of CLSA, Aliuddin Ansari, who was also the CEO of Engro Corporation. Speaking to the attendees, Ansari said that the link between the Pakistani and Chinese financial institutions is still weak. “Your stock market is now owned by the Chinese and China is coming to Pakistan,” he said, “Pakistanis need to seek linkages to their counterparts in China.”
Ansari also drew comparisons between the economic situations in Pakistan in 1997, the first time CLSA came to Pakistan, and 2018, saying that the conditions are still not much different. More came on this issue from the former vice president of the World Bank and former governor of SBP Dr Shamshad Akhtar. She said that economic crises keep hitting the country and while there are many reasons for that, two frequently recurring factors remain lack of domestic resource mobilization and export oriented JVs.
She said, “I was delighted to see the merger of stock exchanges into PSX, finally turning it into a corporate body instead of a playing ground for brokers.” Pointing out to the CLSA and Bank Alfalah representatives on the stage she said, “I believe this is a very competent crowd to bring the next generation capital reforms in the country.”
Ansari and current Alfalah Securities CEO Atif Khan will also acquire a combined 12.6 per cent stake, with the deal expected to be completed by November 2018. CLSA’s Pakistan venture will be called Alfalah CLSA Securities Ltd. and will provide equity broking, research and investment banking services.