Breaking with the past, brokerages target middle-income locales

Brokers increasingly looking to the middle class to grow client base.

KARACHI:

Is it simply a coincidence that two of the largest brokerage houses of Pakistan – AKD Securities and Arif Habib Limited – both held separate investors’ awareness programmes during the current month in Nazimabad, a typical middle-class neighbourhood of Karachi?

“That’s a densely populated area of the city, where a large number of professionals with considerable disposable incomes live. No one [among brokerage houses] ever went there in search of potential investors before,” Abadan Mohajir, assistant manager for business development at AKD Securities, told The Express Tribune on Monday.



Mohajir moderated a two-and-a-half hour session on Sunday evening (June 23), where Karachi Stock Exchange (KSE) Managing Director Nadeem Naqvi and AKD Securities CEO Farid Alam interacted with roughly 600 potential investors about investment opportunities in the stock market.

Earlier, on June 2, Arif Habib Limited, which is the brokerage arm of the Arif Habib Corporation, also organised an awareness programme for potential investors in the same neighbourhood in collaboration with the KSE.

“What we’re doing is not marketing. We’re creating awareness by going into areas where middle-class people live, who have money but lack information about how to invest in stocks,” Mohajir said.

Such awareness programmes are part of a nationwide drive by the KSE to broaden the investor base. About 250,000 Pakistanis invest in stocks directly and through mutual funds, which translates into only 0.1% of the country’s population. In contrast, the investor base in India and Bangladesh is 18 million and 3.5 million people respectively.



According to KSE General Manager for Product Development Sani-e-Mehmood Khan, about 85% of stock investors belong to Karachi, while investors from Lahore and Islamabad account for 12% and 3%, respectively of the total domestic investor base.

Against this backdrop, the KSE plans to hold awareness sessions in as many as 18 cities, such as Hyderabad, Badin, Rahimyar Khan and Sukkur, during the next 12 months in collaboration with a number of brokerage houses.

Mohajir says AKD Securities has organised seven large-scale investor awareness programmes in middle-class areas during the last year and a half. “The response we had on Sunday was overwhelming. Almost each of the 600 people filled out feedback forms along with their comments, which shows that they actually took interest in stock investments,” he said.

Explaining why his brokerage house chose to hold an investors’ awareness session in a middle-class neighbourhood like Nazimabad, Arif Habib Limited CEO Muhammad Shahid Ali told The Express Tribune that 99% of the potential investors who attended the session did not have a trading account ever.

“They were professionals with decent earnings. We told them that annual returns on savings accounts, treasury bills and gold during the last 10 years were 5%, 10% and 16%, respectively. But the KSE-100 Index returns in the same 10 years were up to 34% per annum on average,” he said.

Speaking about his company’s clientele, Ali said about 50% volumetric participation was from retail clients in January. “Their share must have gone up after the recent stock market rally. That’s because whenever volumes go up, the share of individual clients expands invariably more than the share of institutional investors,” he noted, adding that volumetric growth is basically driven by individual clients.

“Retail clients can give you so much business, that if a brokerage house manages to attract them successfully, I believe it will no longer need foreign or institutional investors,” he added.

Published in The Express Tribune, June 25^th, 2013.

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