Samsung Securities is scaling back its Hong Kong operations and turning more attention to the Korean high-net-worth client base, says the firm’s new CEO, Kim Suk.
Kim would not comment in detail on plans for the Hong Kong office, its international headquarters, other than to acknowledge that, “Like everybody else, if the market is tough, we have to downsize, and when it’s booming, we have to grow.”
But Samsung insiders say the firm is going to wield the hatchet. Over the past few years, the securities company has attempted an ambitious build-out in Hong Kong, including investment banking, proprietary trading, seeding funds of hedge funds and broking Asian equities.
Some of those activities had already been scaled back in the face of high up-front costs and few short-term results.
According to sources in Seoul, last year’s poor trading volumes in regional equities has led the group to pull back further. Now the only activity likely to remain in Hong Kong is broking Korean equities for international buy-sides.
Samsung Securities had been hiring up until the end of last year in a drive to become one of the top 10 financial players worldwide by 2020. But the drastic cutbacks include overseas capital markets, corporate finance, equity sales and research divisions, as reported by Anette Jonsson on sister publication FinanceAsia today.
She quoted one source as saying that Samsung's pullback was "sobering news", raising expectations that other firms which have set out to build Asian equities and investment banking operations will follow suit. By February last year Samsung had a research team of more than 40 analysts, and had expanded with the hiring of two sales teams from Macquarie in Singapore and London. The estimates are the firm had about 150 people in Hong Kong.
Kim was appointed to the CEO role in December after running Samsung Asset Management, which saw its assets under management rise year-on-year to September 2011 from $82 billion to $89 billion.
He switched spots with Samsung Securities’ former CEO, Park Chun-hyeon, who is now running the asset management business.
Kim says he will use his network from asset management to increase Samsung Securities’ private banking activities. He claims the firm is already the biggest distributor of product to wealthy Koreans, with around 1,000 clients in that bracket and perhaps 30% of their wallet.
The firm can wrap any kind of product into an investment offering, including mutual funds, structured products, insurance-linked products and consulting services.
To date all of these products have been domestic in scope. Kim says the firm pursues open architecture, and is looking now to add international products, including alternative investments, to the mix. But Samsung Securities needs global fund managers or banks to provide these.
Kim adds that this move is not just a response to the growing clout of Korea’s rich families. It is also because opportunities to source business from European and American investors are shrinking.
“The major supply source of new money is China, Korea and other Asian countries,” Kim notes. This suggests more of the overseas broking operations will target investment groups from the region.
“We have room to grow,” Kim asserts. “The key is personalised service. We can offer a different array of products so our clients don’t have to go overseas if they want a hedge fund, a private equity fund – anything.”
He predicts that, at some point, providing investment services to rich families will become the biggest revenue generator within Samsung Securities.