By Kim Jae-kyoung
SINGAPORE _ Hyundai Securities is facing a major setback in Singapore as speculation mounts that it is moving to close AQG (Able Quant Group) Capital Management, a hedge fund arm of Korea’s fourth-largest securities firm, according to analysts.
They say Hyundai may pull out of Singapore due to poor performance amid the sluggish global financial markets, a huge blow to CEO Yoon Kung-eun, who has sought to find new growth prospects in the Southeast Asian country. But Hyundai Securities has rejected the speculation.
“I was told that Hyundai recently decided to close AQG Capital Management as a result of poor earnings and a gloomy market outlook,” a Singapore-based investment banker said on condition of anonymity.
According to the banker, Kim Hong-shik, head of AQG, stepped down in January. Kim, a derivatives specialist who headed Asian equity-linked products for ABN AMRO, had served as head of the hedge fund since it debuted in July 2013.
“With his resignation, Hyundai has reduced the number of staff and virtually halted operation of the hedge fund,” he said. “They sent back most of the fund to its head office. AQG staffers are now under the control of Hyundai Able Investment (HAI).
In July 2013, Yoon set up two corporate entities _ AQG and HAI _ in Singapore to expand the company’s presence in Asia. Hyundai Securities Asia, its Hong Kong subsidiary, invested 100 percent in both firms.
AQG is a hedge fund management firm following an equities long/short market-neutral strategy, while HAI is a proprietary trading house that handles commodities and derivatives.
HAI chief Gene Orr has taken the helm of AQG. He is known as a trading expert who previously worked for the Korea First Bank, Cargill Investment, Citibank and Jefferies.
Hyundai’s apparent move to close AQG has raised speculation that Hyundai will leave Singapore. When Yoon opened the Singapore operation in 2013, he had high hopes for it.
“AQG starts trading with $100 million but we aim to raise assets under management to $1 billion and have commission income of $40 million within three years,” Yoon said in 2013.
Yoon bet on Singapore while closing other overseas operations _ corporate entities in London and Tokyo, and a representative office in Vietnam.
However, a spokesperson at Hyundai Securities in Seoul denied the claim, saying the company has no intention of closing AQG and leaving Singapore.
“It is a groundless rumor,” he said. “It is true that the AQG head resigned in January and the firm has been put under the control of HAI. However, it is not a preliminary move to either close offices in Singapore or reduce operations. It is a process of business realignment.
“All I can say is that we do business as usual and will work harder to improve our performance. Since we are still enthusiastic about overseas business, it is nonsense to say that we will scrap operations in Singapore.”
But he refused to share any details, or release financial data, of the two Singapore units.
Hyundai has five overseas operations _ Hyundai Securities America, Hyundai Securities Asia, Hyundai Securities Beijing Representative Office, AQG and HAI.
When contacted, HAI chief Orr refused to talk. Instead, an HAI official said: “AQG staff have been reduced and it is now headed by HAI chief Orr after Kim’s resignation. Orr is not allowed to talk to media without authorization from our Seoul office.”
Over the past few years, several Korean securities companies, including Mirae Asset Securities, KTB Investment and Securities and NH Investment Securities, have left Singapore because of poor earnings.
“It is very difficult for Korean securities firms to make profits in Singapore because they don’t have networks and know-how,” another source in Singapore said. “That’s why many Korean securities firms gave up.
“AQG has suffered from anemic performance amid sluggish global stock markets and Hyundai has reduced the Singapore operations since late last year.”
Hyundai Securities Asia, which has 100 percent of AQG and HAI, posted net losses of 700 million won in 2015 and 355 million won in 2014.
On March 31, KB Financial Group won a bid for a controlling stake in Hyundai Securities, owned by Hyundai Merchant Marine (HMM), for more than 1 trillion won. HMM, a cash-strapped shipping affiliate of Hyundai Group, is selling the stake to pay part of its 4.3 trillion debt.