The Korean securities firm aims for regional dominance and expands its Hong Kong subsidiary to become an investment banking hub for Asia
Samsung Securities has announced that it will expand and refocus its Hong Kong subsidiary as part of a new regional and global strategy formalised since the arrival in June of Park Chun-hyeon as chief executive officer.
Samsung's Hong Kong office, which until now has concentrated solely on Korean securities brokerage, will grow to include M&A and equity capital market origination by a corporate finance department staffed by six professionals, as well as trading, institutional brokerage of Hong Kong stocks and principal investment. The research and sales department will be made up of 35 people out of a total initial headcount of more than 50, which will also include support staff. The subsidiary will increase its capital by $100 million from just $1 million currently.
Korea's leading securities firm believes that it needs a significant presence in a major money centre, such as Hong Kong, to more effectively compete with global investment banks in the fast-growing Asian emerging markets.
Samsung recognises that Asian economies are becoming a more important part of the worldwide investment banking business, and that the momentum is unlikely to slow down. According to Park, who has worked at Korea's largest conglomerate since 1979 and most recently was Samsung Life's chief financial officer, Samsung is "laying the foundations for developing a regional and global presence", and has the potential to compete successfully against the US and European investment banks which now dominate the Asian market.
Kim Suk, who is a member of the Samsung Securities board and senior executive vice-president for capital markets and investment banking in Seoul, will have responsibility for the Hong Kong subsidiary, and a managing director will be sent over to be its chief executive. However, the plan is to "thoroughly localise the office" by hiring local people with experience in global investment banking as business heads who will be given operational autonomy. The securities firm intends to offer competitive salaries and other incentives in order to attract top-quality bankers.
Samsung is preparing to apply for a local licence, but hopes that the office will be fully staffed by the end of the year and ready for business at the beginning of 2009. It aims to achieve standalone profitability within five years. It's possible that the firm will move into new premises as it grows but the "offices need to be in line with the quality of the Samsung brand", says Park.
It's hoped that the greater international experience gained from operating out of Hong Kong will also benefit the firm's domestic business — in particular from the transference of skills and knowledge and access to a wider array of assets and financial instruments, which can be sourced for structured products and then offered to the Korean retail market.
Korea's financial services sector is set to become much more competitive following the implementation of the Capital Markets Consolidation Act (CMCA) in February next year. Sometimes described as the country's financial market "big bang", the act will allow a greater variety of services and products to be offered to investors by competing local brokerages, banks and foreign institutions.
Last year, Samsung Securities announced an ambitious target to be among the world's top 10 financial services companies by 2020 and, as a first step, to become one of the major Asian regional players by 2012. The transformation of its Hong Kong subsidiary into a centre for its Asian investment banking activities is intended to be a major move towards achieving that goal.
In the longer term, Samsung Securities aims to enter other Asian markets, including China, India and Southeast Asia from its base in Hong Kong, securing a role as a hub for its investment banking activities within the region, before ultimately becoming a global investment bank. Future acquisitions will occur when "the time is right", Park says.