Korean brokerages hope to gain foothold abroad

By Kim Yoo-chul

Korean brokerages have reasons to expand overseas _ at least one thing is clear: there is little chance for growth here.

They put forth great efforts but the results remain questionable. Despite a decade of vigorous pitches to go global, most of the country’s top brokerages are far from attaining their ambitious goal of becoming Asian leaders.

And yet, they never stop exploring business opportunities outside the country.

In fact, they are late movers in globalization compared to their cross-city tech peers such as Samsung Electronics, LG Electronics and Hyundai Motor.

Against this backdrop, they are seemingly changing strategies to make their efforts more fruitful in two ways. They are either acquiring stakes in companies in target markets or hiring experienced experts for local relevance.

“We have to compete with global players as we are living in the world of equity. We are seeing continued volume growth in financial assets globally,” Mirae Asset Financial Group Chairman Park Hyeon-joo said in his New Year message to employees.

Park said Mirae Asset, the country’s top-tier brokerage, should challenge and develop new markets to achieve sustainability. Mirae Asset is the frontrunner among others in the amount of spending on overseas business.

It runs 14 foreign operations including 11 affiliates and three offices.

The outfit has adopted customized growth strategies in accordance to regions and markets. It provides “comprehensive business model” services to clients in Hong Kong, Indonesia, Vietnam and the United Kingdom.

Its Bejing and Mongolia affiliates sell investment banking services. Mirae’s New York affiliate was the first Korean financial company to sell “prime brokerage services” to hedge funds in the United States by partnering with U.S.-based banks.

It’s fair to say that Korean brokerages were hobbled with weak international experience, and weak sales networks. They are facing serious challenges in penetrating key markets such as China and countries in Southeast Asia due to weak brand recognition and tough regulations.

NH Investment and Securities is one of the few domestic brokerages that acknowledges the need to customize for “local markets” and this localization is crucial for overseas business.

NH, which operates eight overseas posts in six different countries, received approval from financial authorities in Hong Kong for money lending services after a capital increase.

In Indonesia, it increased its share of the NH-Korindo Securities, a joint venture with NH and Korindo Group in the Southeast Asian country, to 80 percent from 60 percent.

In Vietnam, NH plans to establish a new entity this month as it has completed the purchase of CVB Securities, company officials said.

KB Securities, which previously increased the capital of its Hong Kong subsidiary by $80 million, acquired Maritime Securities of Vietnam, last year. Samsung Securities retrenched its Seoul office in sync with other brokerages and saw a similar opportunity.

While it’s understandable to see brokerages’ moves to focus in Asia, analysts say those operating abroad have focused too much on catering to Korean communities and companies.

“That’s why brokerages are targeting Vietnam, Indonesia and former Soviet bloc countries as Korean technology companies have a stronger presence in these markets,” a KB Securities analyst said.

“It’s efficient to start overseas operations based on Korean customers. But the growth will slow if they can’t expand their customer portfolio other than with their key base.”