banking and capital markets
September 23, 2012
Beijing Spreads Its Wings
China is moving, slowly but surely, to use its financial clout to promote its economic interests beyond Asia.
By Allen T. Cheng
WHEN LIN YONG CAME TO HONG KONG IN 2007 TO OPEN the first overseas operation for Haitong Securities Co., Chinas second-largest brokerage by market value, he brought a draft check for HK$50 million ($6.5 million) and two assistants. It wasnt nearly enough. Many of Haitongs mainland clients ignored the offshore unit because it lacked the scale, experience and range of products and services of its international rivals.
Realizing that Haitong would have to make a bold move to gain an offshore foothold, Lin in 2009 led the firms $345 million takeover of Taifook Securities Group, then Hong Kongs biggest locally owned brokerage. It was the largest-ever foreign acquisition by a Chinese securities firm and made Haitong the first Chinese institution to have a full-scale offshore trading platform capable of underwriting bond and equity offerings, and providing M&A advice to clients.
The best way to grow is through mergers and acquisitions, Lin, now CEO of the firms Hong Konglisted subsidiary, Haitong International Securities Group, tells Institutional Investor. To build Taifooks operations in Hong Kong would have taken us ten years. As it is, growth with Taifook has been less than spectacular. Haitong ranked a modest No. 14 as an equity underwriter in Asia ex-Japan in the first half of this year, arranging seven initial public offerings worth a total of $509 million, according to data provider Dealogic. The Hong Kong subsidiary generated 5.8 percent of Haitongs 9.3 billion yuan ($1.5 billion) in revenue last year and 2.8 percent of its 4.4 billion yuan of pretax profits. Lin is undaunted, though. He aims to make Haitong one of the ten largest global investment banks, a goal he figures will take a decade or two and more acquisitions to achieve. We definitely will be looking at the global markets, and all possibilities remain, he says. ....