There's been a lot of talk about Nomura's expansion in Asia. The firm is obviously very enthusiastic about the region.
Shinohara: Yes we think there are a lot of great opportunities. Obviously we're very focused on China. Isn't everybody?! But we're also interested in Taiwan, Korea and South East Asia. We think India has a lot of potential as well. Head office recently gave the Hong Kong operations a $400 million capital injection. We needed this bullet so we could really upgrade and expand our ECM and M&A operations.
You personally have a very strong ECM background I believe?
I've been in ECM for the whole 15 years I've worked at Nomura. Hopefully this isn't because senior management don't think I'm talented enough to do anything else (laughs). But I'm really glad. It's given me an enormous amount of experience.
After a short stint in Tokyo, I went to London in 1993 and worked on the syndicate desk before going on to run European ECM. Naturally, a lot of our business came from international Japanese deals, but we also ran the books on a large number of deals from Europe, the Middle East and Africa.
I now plan to replicate this model in Asia. Having someone like David Dean as head of ECM in Asia helps. We've worked side by side for a number of years since David first joined the London desk a year after me in 1994. Together we acted as a JGC (joint global co-ordinator) on the IPO for Estonia Telecom, for example.
Before I came to Hong Kong at the beginning of the year, I also spent about three years back in Tokyo running Japan ECM.
When most people think of Nomura's ECM operations these days, it's the Public Offerings Without Listing (POWL's), which automatically spring to mind.
Yes. The idea has really taken off over the last two years and we've placed over $1.3 billion into the Japanese market through POWL's. Most of the deals have been from China, although we've also done deals from Taiwan and Korea as well.
Generally, deal sizes need to be higher than $500 million otherwise it's not really that worthwhile adding Japanese retail distribution. But I should point out that we're very selective about the kind of companies we take to Japan.
Recently we've started to discuss full listings on the Tokyo Stock Exchange again. For some issuers, the additional documentation requirements don't make strategic or financial sense and a POWL is a better option.
But for others, a full listing has a number of advantages. Issuers can get a higher profile from a full listing and in some sectors they should achieve a better valuation in Japan than either Hong Kong or New York. For example, there have been a number of press reports about a Chinese company, which is hoping to become the first media company from the Mainland to list overseas in Japan.
But I thought a lot of foreign companies were put off the TSE because of all the bureaucracy?
Things have got a lot easier. The TSE has become much more flexible in its attitude and instituted a number of market friendly changes. For example, it is thinking of taking away the wall that divided the Japanese and foreign corporates and trading them together on the same board.
You've established a strong niche with the POWL's. Are you looking to use this experience as a springboard to gain more control over allocations and become an equal bookrunner with other banks?
Yes, we've run big deals in Europe for a long time and would like to do the same here. Using Nomura as a JGC doesn't just mean increasing distribution to Japanese institutions, although this is clearly a big plus point. Nomura has global reach, with 100 Asia-dedicated sales and trading people in London, New York and Singapore.
So how confident are you of winning a JGC role?
I hope you'll see our name as a joint global co-ordinator on a big Asian transaction very soon.
You also oversee Nomura's M&A operations in Asia. How active are you?
I'd say we're an advisor on about 20 deals a year. Five to six are relatively large. For example, we recently closed an investment by Sanyo Foods into a Chinese joint venture with Taiwan's Tingyi Holdings. Many Japanese food companies are looking at sizeable investment opportunities in China.
Is your China activity growing because Nomura is, or because there's more interest in China from Japan?
It's both. Japan is definitely re-awakening to China's potential and we're also becoming more aggressive about going after business. A few years ago, you'd only see a couple of sizeable Japanese investment in China. The figure has gone up quite a lot. A lot of activity is coming from international companies looking to buy China assets. This year we advised Asahi Breweries and Itochu Corp in their purchase of a 50% stake in a new company co-owned with Tingyi Holdings. The $950 million enterprise oversees 13 beverage subsidiaries in China.
Does most of your China M&A business come from Japan?
It's mainly Japanese at this stage, but not exclusively so. For instance, we advised on the sale of some Beijing government assets to a German company.
How aggressive are you about increasing headcount?
We've hired about 10 people in investment banking over the last two months. Steve Metcalfe was the most recent hire. As you recently reported, he comes from CSFB and is going to co-head Asian ECM with David. We're still looking to make a couple of other hires in ECM as well.
At the moment, we also have about 40 people on the corporate finance side, of whom about half are China focused. Then we have a further 30 people in corporate advisory, which handles M&A products.
Major hires include David Ng, a key player in our China corporate finance group. He previously worked at Morgan Stanley and ABN AMRO. But we got to know him when he ran the Bank of China IPO for BOCI. We did the POWL on that deal.
We've also appointed a new co-head of investment banking in Taiwan, where we have always had a strong presence. We recently hired Philip Chan, who used to run Taiwan IB for ING.