Shenyin & Wanguo
Founded by a merger in 1996, Shenyin Wanguo has a dominant position in the Chinese A share market which many predict will grow to be the biggest market in Asia. With that in mind, Shenyin Wanguo may be thought of as a kind of Chinese Nomura of the future. Its key shareholder is the powerful China Everbright Group and that in itself is a source of strength. With 108 branches across China, it last year made total profits of Rmb1.22 billion, with a market share in the A market of 4.83% and a 14.4% share in the foreign investor B market.
Tai Fook, founded in 1973, is one of the most profitable brokerages in Hong Kong, with gross margins of over 30%. Backed by the Cheng Yu Tong family (principal shareholders of New World Development), it has a strong and insightful Hong Kong focus that spreads across retail investors and institutional ones. Distribution is aided by its 10 branches (as well as one in Macau) and among local firms, it is noted for its long term approach to investing in technology. Indeed, it has a 15% share of online trading in Hong Kong, and has grown its customer base from 7,000 clients in 1996 to 42,000 today, giving it a 4% share of the overall Hong Kong market. With its aggressive culture and strict cost control, it is well-placed to take advantage of opportunities in good times and bad.
JM Morgan Stanley
Nimesh Kampanis JM Morgan Stanley has a market leading presence in Indian brokerage. With its 13 retail broking offices in eight cities and its 6,000 sub-brokers, its penetration is very deep. Indeed, over 55,000 customers throughout India have transacted business through the firm. And in terms of institutional sales, its highly ranked research has helped to ensure that it is a fixture on any central dealing list. In the time period of these awards, it turned over almost 700 million shares, according to Autex Block Data. Led by Ridham Desai, the nine-person research team covers all of the Indian companies that are in the MSCI benchmark, and in the last 12 months has made successful calls on Reliance Industries, where its estimates were 15% higher than the consensus (the stock outperformed the benchmark by 65% during the year); and on HDFC where after it issued a strong buy, the stock outperformed the benchmark by 105%.
Danareksa is the top firm in Indonesia by equity volume and value traded and has further strengthened its position through its online strategy. The firms research team covers 43 companies, which comprises 69% of Indonesias total market capitalization. Its dominance remains unquestioned.
Merrill Lynch made an enormous commitment to Japan when it picked up the remnants of Yamaichi in 1998. In the ensuing time period, rivals lost no opportunity to question Merrills move, and pointed out that the exercise has cost Merrill dearly in management time and investment. However, the fact remains that Merrills 33 branches, and 110,000 Japanese clients (managing over Y1.7 billion) makes the firm a formidable force. Moreover, it has endeavoured to bring international best practice to the local market (that is, giving sound long-term investment advice, rather than simply churning funds to earn commission). At the core of this approach is the firms belief in research. It has 40 equity analysts covering 260 companies in Japan. In the 2001 Reuters Tempest survey, Merrills research was ranked first by a huge margin, while its analysts were ranked top in autos, banks and telecoms. In the Institutional Investor magazine and the Nikkei analyst rankings, it came top in banks, and shipbuilding. (And while the local equities house award is primarily designed for domestic brokerages, we feel that in spite of its being a global institution, Merrill has become part of the domestic scene in Japan.)
Good Morning Securities
Good Morning is the firm that rose phoenix-like from the ashes of Ssanyong Securities and, with its infusion of foreign investment, has undergone something of a revolution. With a new confidence, it even posts equity research written about it by firms such as CLSA and Merrill Lynch on its Web site. Indeed, it is reckoned to be a model of corporate governance. It also astounded some of its bigger rivals with how quickly it has turned around. Its Internet trading portal has been a roaring success and now has the highest return on equity of any Korean brokerage, and unlike some of its competitors (which had losses) ended with a W71 billion profit after tax. What makes the Good Morning story more appealing still, however, is that some big foreign institutional investors not only use it, but praise its research as being some of the most insightful around in large part because it is not encumbered with the corporate finance-sensibilities of many of its rivals.
In an environment in which the turnover on the Kuala Lumpur Stock Exchange collapsed by 59%, the market share commanded by Arab-Malaysian actually rose to 6.9%, giving it a leading position. This is up from a 4.3% share in 1997. With 17,000 retail investors, it gains 62% of its gross brokerage income from this client base, and the rest from institutional clients. It has 43 institutional dealers and 350 remisiers (dealing with retail). Local magazine The Edge rated the firms bank and transport research to be the best in Malaysia. Meanwhile, it posted a profit of M$54.7 million, and in the six months to March 31, it was one of only two firms in the industry able to post a pre-tax profit.
With its forthcoming merger with Vickers Ballas (to be called DBS-Vickers), the new entity will be Singapores broking powerhouse. This strength was further augmented by the acquisition of Lum Chang Securities. DBS has over 500 trading representatives, as compared to, for example, GK Gohs 300. Not satisfied with dominating the Singapore market, the firm has well publicized intentions of becoming a regional player. Should DBSs proposed takeover of Overseas Union Bank occur, its dominance in Singapores broking market will be further increased.
China Securities has 23 branches throughout Taiwan. It expects to expand this to 25 by the end of the year. With over 280,000 customer accounts, it has seen an annual growth of 21.6%, and has also garnered 66,000 online accounts. Perhaps what is most impressive is the fact that it is the most productive broker per branch. And with 1,290 foreign institutional accounts it has become the de facto favourite of sophisticated foreign players in large part thanks to its commitment to producing high quality research.
There arent many local houses in Thailand these day, with much of the industry being foreign-owned. Seamico is one of the few exceptions, and ironically enough, since the Asian crisis, it has been growing very fast, and now has a market share of 6.7%. Its focus on research and technology and its mix of local and expatriate management are among its many strengths. Its seven branches are complemented by its very successful Internet site which recently reported getting more than a million hits in a single day. Its online volumes, in fact, are growing 40% month-on-month.
We stressed to those applying that this was not a capital markets award (that is, equity capital markets deals completed). Primarily it is designed to reward domestic brokerages. Brokerage firms were asked to demonstrate their local market share, their distribution strength (branches), and the quality of their research (and any good calls they made on stocks). They were also asked to speak about their online strategy and their profitability.