Three foreign banks suspend brokerage operations

KARACHI: Three foreign banks have suspended their brokerage operations in Pakistan amid continued incidents of terrorism, bleak economic prospects and political instability.

In March, Citibank shut down its equity research office in Karachi, the financial hub of the country. Credit Suisse Group had already closed its research operations earlier this year, following JP Morgan Chase decision in late-2008 to suspend its brokerage operations in Karachi.

A spokeswoman for the Credit Suisse said that the bank had closed its research division, but covers Pakistani companies from Singapore. No official comment was available from the Citibank. JP Morgan retains a seat on the exchange, but is not active, its spokesman said.

The latest closures are a further blow to the country at a time when it is struggling to revive its battered economy.

To get some support, the government had approached the International Monetary Fund (IMF) in November 2008 due to a balance of payments crisis sparked by a rising oil import bill and after reviewing the economic situation of the country, the fund had earmarked $11.3 billion for Pakistan.

Foreign banks began started to invest into Pakistan’s equity market in the late -2006 when the economy was growing by an average of 7 per cent for several years. The economic growth was fuelled by liberalisation of the banking sector and a consumer spending boom. But Pakistan’s economy began to unravel in 2008, causing runaway inflation and a growing current account deficit.

The country, which is reliant on expensive imported oil, faces unabated power shortages, which further clouded the economic scenario. The resignation of former president Pervez Musharraf in August 2008 further spooked investors.

Billions of dollars were wiped off from the stock market in 2008, as foreigners opted to exit amid fears of political instability and growing incidents of terrorism.

The stock market regulator imposed trading curbs between August and December 2008 in an attempt to halt the slide, but the measures remained futile.

During the year ended on June 30, 2009, foreign investors pulled out $511 million from the countryís premier stock market.

However, foreign buyers are back in the Pakistani market. Since the start of this fiscal in July to-date, they have invested around $465 million.


Source The News