EXCLUSIVE WITH AQEEL KARIM DHEDHI

By KHALIL AHMED
Mar 20 - 26, 2006

Aqeel Karim Dhedhi, generally known as AKD, is a renowned figure on the economic front of the private sector in Pakistan and of course the most competent to speak on the current economic issues especially on the capital market.

In an exclusive interview with PAGE, while giving his comments the sharp movements currently experienced in the stock market, AKD disagreed that only a few people manipulate the market.

"Composition of the market is such that manipulation by a few cannot take place". Capital Market is a very sensitive place so even a small piece of a negative news immediately affects the market movement.

There was an impact of the rumors regarding the documentation of the investors by CBR however that impact abated quickly. Dhedhi believes that when the small investors speculate, they suffer. If some one does not have proper knowledge of the market one should not indulge oneself into it. It is not at all a prudent strategy by small investors without knowledge to overstretch through borrowing etc. On the other hand, he thinks that many scripts and shares are undervalued and savvy investors have opportunities in the market. Economic fundamentals show a promising future of the capital market. When asked whether the Gulf Region market had any impact on our market, he replied that every market had its own unique dynamics and as such the Gulf Region market did not have much impact on our market. Gulf Region market has lack of depth and lack of regulatory framework. Going forward, AKD intends to have sizeable position in the capital market of the Gulf Region.

We believe in making pioneering efforts for the growth of business. Recently, we held the 1st AKD Investor Forum, in London, U.K. during the visit of the Prime Minister. This event, the first of its kind by any Pakistani firm, was attended by over one-hundred international fund managers and private equity investors and was addressed by the Honorable Prime Minister, The Governor of State Bank of Pakistan, Chairman Securities and Exchange Commission of Pakistan and top corporate executives of Pakistan.

This event was able to showcase Pakistan and also proved that if properly marketed, Pakistan can attract a lot of foreign investment. Dhedhi said that his company would continue to hold such conferences in the future also to attract foreign direct and portfolio investment that will also benefit the capital markets.

'The stock broking industry has changed a lot since I started. Today, we are one of the largest players in the industry and see tremendous growth in the industry. Pakistan has one of the lowest numbers of investors in the capital markets. With changing regulations and technological advancement all this is set to change. We are the pioneers of Internet based trading in Pakistan and going forward we see a lot of growth in business. AKD will continue to play a major role in the capital markets and shall maintain it position among the top players in the market, InshaAllah.'

A soft spoken and down-to-earth person, AKD outlined various aspects of his personal and professional life in the discourse.

He is passionate about the welfare of the humanity and looks forward for peaceful and brotherly relationships among all human beings. He believes that every human has a brief sojourn in this mortal and mundane world so one needs to endeavour for the betterment of humanity.

'I was born in Karachi on 18 July 1956. My father was a very successful businessman. We belong to Junagadh where our family was involved in textiles. In Junagadh, my father was a highly respected member of the community and was a member of the Muslim League. The first time Quaid-e-Azam Mohammad Ali Jinnah visited Junaghad, it was on my father's invitation and he made a speech at the Dhedhi house. Immediately after migrating to Pakistan, my father went to Columbo and established his textile business. We finally closed the Columbo operations in 1975. In Pakistan, my father was very active in Textile Trading, Real Estate Development and Stock Broking. We also had a setup in Chittagong that was sold at the time of creation of Bangladesh. I have not had a lot of schooling. I studied for my B. Com but never appeared for my exams. Officially, I discontinued my academic studies after my intermediate. I was very active and played many sports. I was an excellent swimmer and a very good cricketer. I won several swimming awards. Kaleemullah Faruqi Sahib trained me and he was an exceptional swimmer. I was also very active in martial arts. I was the despair of my teachers at Pakistan National School, Karachi. I was a very weak student and never enjoyed studying. The only subject I liked was Mathematics and never had a problem with it.

I was very interested in business and started very young. I often bunked school but instead of loitering with friends, I used to go to the Cotton Exchange with a friend.

I admire Javed Omar Vohra. He is my best friend. If I had to give my money to any other stockbroker, I would give it to him -he is trustworthy and reliable. Another person I really admire is Rafiq Tumbi. He is a stockbroker and a chartered accountant with tremendous patience and no greed. He has great knowledge of the capital markets. He is my business partner in real estate.

God has entrusted me with His money and I want to spend it on His purpose. I contributed to the Shaukat Khanum Memorial Hospital set up by Imran Khan. Last year I was president of the Kutiyana Memon Hospital. I also run various charitable schools including the Kutiyana Memon School that has the distinction of producing people like Moin Fudda, Arif Habib, Dr. Hashwani the eye specialist and many more.

I got interested in business very early in life. I saw my father dealing in "Bonus Vouchers" at the stock exchange and I did my first business deal in the Cotton Exchange when I was in the 8th grade and just fourteen year old. My father realized that I was not interested in studies, so after my matriculation, in 1973, I went to Jeddah where he had textiles business. However, owing to the war in Lebanon, where we had many customers, I returned to Pakistan in 1974 and decided to pursue my passion of working in the stocks exchange. In those days, "bonus vouchers" were traded on the stock exchanges.

Trading was in my genes! My father used to trade in Bonus Vouchers at the stock exchange. I started with trading at the Cotton Exchange. I looked after the family's construction business for a few years but ultimately, I settled down for stock broking that was my passion. Initially, I used to trade for myself and later started to get clients and became a broker.'

When asked about any unfortunate incident, he said 'in 1976, I ran into a spot of difficulty when I was cornered in the market and hence suffered losses. In those days there used to be forward trading - there was ICI, Batala, National Motors and there used to be a lot of speculation. A certain broker had cornered the shares of Batala and I got stuck because I had sold short and I was suffering heavy losses.'

'My proper entry into stock brokerage came in 1984. I started a brokerage firm under my father's name called Haji Karim Haji Abdul Rehman Dhedhi. Prior to this, I used to work as a client; after this I started getting clients. In 1990 I transferred it into my own name, Aqeel Karim Dhedhi Securities, and what you are seeing today is that same brokerage house I started in 1984.

Stocks were my passion and to date remain so! I did not enter with a master-plan or a very well defined strategy. As the business grew and my vision developed, my organization kept growing. There was no strategic plan or any such fancy thing. My guiding principals were to provide good service to my clients and even to this day, we pride ourselves in providing good quality service to our clients.

We are a service organization. Being one of the major players in the financial services industry our product strategy is based on international norms and standards and the offering of other full-service brokerage houses and investment banking firms globally.

In equity brokerage we have to, per force, follow the competition. Unfortunately there is tremendous price competition in the stock broking industry and we have to follow other industry players in setting the prices for our services.

In consulting and investment banking areas, the standard industry practice is to charge a certain percentage of the value of the transaction. Unlike consumer products, our industry is highly regulated and our marketing strategy is based on providing focused and quality research to our clients that helps them make better investment decision and then we hope and expect to get more business from them.

Our growth has been steady and it was financed through equity, retained earnings and very large bank funding. Our business requires a lot of capital and we use every avenue available for generating liquidity.

We are one of the largest players in the local capital market. The quality of our human resources that, in turn, produce quality research and provide high quality services to our clients is a major factor in our success. The ability to service clients via our understanding of the market and our capacity to transact very large orders has given us an edge over many other players in the market.

I do not worry about difficulties. I am a person who believes in taking challenges. Having said that, perhaps, the most difficult period in my professional life was in 1998 after Pakistan tested the nuclear device. At that time the state of the Pakistan market was terrible -it came down to about 890 points. All the foreigners wanted to leave the market, the foreign currency accounts were frozen -it really was terrible. The foreigners wanted to sell their shares but the situation was so bad that no broker wanted to buy them. I decided to buy their shares privately at a 10% discount because I wanted to maintain the confidence of the foreigners. I wanted them to know that even if the State Bank had frozen the dollar, we would still buy stock from them. I took personal financial risk and purchased the shares and held to them for a long time but that gave the confidence to the foreigners to come back to the market and I was rewarded when I sold those shares at huge profits.

I see AKD continuing to play a significant role in the capital markets. We are one of the largest players in the market. We have approximately 8% share in the total volumes traded in the market. We are very active in the advisory business and have worked as advisors, both to the Privatization as well as to the buyers in some major privatization transactions. Moving forward we will continue to play a due role in the capital markets of Pakistan.'

PAGE inquired him about his competitors and he said, 'as members of the Karachi Stock Exchange, all members/brokers of the KSE are our competitors. However, few large players in the market are J.S. Capital, Arif Habib Securities, KASB Securities and many others compete with us in the market. We try to give best quality service to our clients. Our sales research team is on of the best in the industry. On the institutional side, we have a very good client base of, both, local and foreign institutions. Beyond that, I can safely say that we are, perhaps, the pioneers of market making in Pakistan. In the early 90's when foreign investors came to Pakistan, they wanted someone to be there if they wanted to buy and sell large lots. The Pakistan market lacked the depth and liquidity to cater to their needs. I used to buy and sell on my own account and offered "bids and offers" to them, irrespective of the availability of liquidity in the market. I believe this is one thing that sets AKD apart from others. Similarly, as mentioned earlier, this capacity to trade in large blocks endeared us to many foreign institutional investors in the post-nuclear-testing period in 1998. To date, our capacity to participate in large deals remains one of the most distinguishing features that set us apart for the competition.

We operate in a highly regulated industry. At present, the regulatory regime is ever changing and is in the constant state of flux and ever changing. New products are being introduced, the rules of the game are changing and there is demand for more changes in the way this industry operates. Obviously, every change brings challenges with it and capital markets are no different. We keep on adapting to the changing regulatory environment. Overall, the general business environment and the economic policies have been favorable to the broking industry and the capital markets.

We live in a global village and money does not know any boundaries! Capital markets are very sensitive to economic and political developments. Changes in the global markets have a very direct impact on financial markets everywhere. For example, changes in global energy prices and the fluctuating prices of crude oil have an impact on the oil and gas sector. Similarly, any major changes in exchange rate parity also impact the capital markets. On the business side, the interest or lack of interest of foreign portfolio investors also has impact on our business.

Times have changed. No business can survive without professional management. Other than AKD Securities, we are involved in many other businesses and professionals run all. Members of my family are also involved in business but going forward, I plan to structure my companies in a manner that my family can be shareholder in the businesses but they will be managed by professionals.'