CLSA heads back to Pakistan in China Belt and Road push

HONG KONG: CLSA Ltd., the offshore platform of Chinese investment bank CITIC Securities, is returning to Pakistan after almost two decades, as the company controlled by China’s biggest brokerage steps up its expansion into markets that are part of the government’s Belt and Road Initiative, Bloomberg reported on Thursday.

Hong Kong-based CLSA agreed to buy a 24.9 percent stake in the securities unit of Bank Alfalah, which is backed by the World Bank’s International Finance Corp., according to a statement on Thursday. The joint venture will be chaired by Aliuddin Ansari, who was chief executive officer at one of Pakistan’s largest conglomerates and previously CEO for the local unit of Credit Lyonnais Securities Asia (CLSA).

Ansari and Alfalah Securities CEO Atif Khan will acquire a combined 12.6 percent stake, with the deal expected to be completed by November.

The transaction comes a year after Pakistan was upgraded from frontier to emerging-market status in MSCI Inc.’s global indexes, which fueled expectations that, along with investments from the $60 billion China-Pakistan Economic Corridor, the country would lure a wider class of investors. CLSA, the international brokerage of China’s Citic Securities Ltd., is pushing into markets including the United Arab Emirates and Bangladesh after setting up a 25 percent-owned venture in Sri Lanka in 2014.

“The cost of entry into the market is reasonable and while it remains under-owned, it is a good time to establish a formal presence,” CLSA CEO Jonathan Slone said in an interview, while declining to share financial details. “Our strategy is to establish an on-the-ground presence in all major Asian markets, with a particular focus on markets in the Belt and Road Initiative.”

CLSA exited Pakistan in 2001 due to what Slone called “considerable instability” at the time -- despite the operation being profitable.

The South Asian nation’s security has improved; terrorist violence dropped to the lowest level in more than a decade last year, according to South Asia Terrorism Portal.

“When foreigners came here years ago, you always had an armed guard, now you don’t bother,” Donald Skinner, group secretary at CLSA, said in an interview in Karachi. “I don’t think that message has got across to many people out there.”

CLSA is now in discussions for a presence in Bangladesh, said Skinner, without providing more details.

Pakistan’s benchmark KSE100 Index has fallen about 14 percent since MSCI’s move, amid economic and political instability. Finance Minister Asad Umar -- a former head of Pakistani conglomerate Engro Corp. who was succeeded in the role by Ansari -- said this month the economy may need more than $12 billion to halt a looming financial crisis.

He also promised to make all Chinese agreements public after criticism of Beijing’s opaque Belt and Road loan terms.

“If the economy is not moving and there are no great stories coming out then frankly you will go place somewhere else.” said Skinner, speaking of how international firms view Pakistan.

“I think that’s broadly speaking what’s happened -- and when that happens, that creates opportunity because people are overlooking the opportunity.”

CLSA’s Pakistan venture will be called Alfalah CLSA Securities Ltd. and provide equity broking, research and investment banking services.