JPMorgan launched macro-economic and equity research coverage earlier this year, and is the only foreign investment bank to have a research coverage and sales team onshore. On the derivatives side, JPMorgan provides global financial institutions and hedge funds with economic exposure to equity movements through a range of derivative products.
JPMorganÆs presence in Pakistan dates to 1994 and now spans investment banking, treasury services, cash equity broking, equity and economic research coverage and sales. Across these businesses, JPMorgan has tripled its bankers on the ground in Pakistan to 20.
Reza Rahim, JPMorganÆs senior country officer in Pakistan comments that the firm aims to ôprovide one-stop solutions to our clients offshore and domesticallyö. Rahim has been covering Pakistan for JPMorgan for 10 years, mostly onshore with a two-year stint offshore in Singapore.
A combination of capital market reforms, deregulation of several sectors, successful privatisations of state-owned assets and improved standards of corporate governance are fuelling international investor interest in Pakistan. Companies have shown strong corporate earnings and on a price-earnings (P/E) multiple basis Pakistan trades cheaper than a number of Asian economies such as Malaysia and Indonesia and significantly cheaper than neighbouring India.
JPMorgan was the first foreign firm to obtain a corporate seat at the Karachi Stock Exchange in 1996. In 2001, the bank decided to wind down its equity broking business in Pakistan, although it retained a presence in investment banking in the country. At the time, JPMorgan felt it did not have sufficient scale in equity broking to maintain a sound business franchise although it continued to execute orders for overseas equity broking clients through sub-broking arrangements in Pakistan. However, JPMorgan retained its broking card and as international investor interest in the country has grown, felt it was time to again to launch onshore broking services.
Rahim elaborates: ôWe have been closely monitoring portfolio flows into the country and the increase in the last three years, especially the numbers released for the latest fiscal year ended June 2006, convinced us the time was ripe to start offering our clients the benefits of our broking experience and ability.ö
Rahim explains why the corporate seat is a significant competitive advantage for the firm. ôOnly 200 cards have been issued since 1947 and over a period of time some consolidation has occurred hence the number of active brokers is even less then 200. We offer our clients a unique value proposition. Our clients will benefit from being able to talk directly to our on the ground analysts and sales people and from our ability to transact directly for them without having to place orders through panel broker intermediaries.ö
Rahim says details of the broking cardÆs capitalisation are confidential however: ôJPMorgan has adequately capitalized the business to ensure we can transact on behalf of even our largest institutional clients.ö