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| NH Investment & Securities' Hong Kong subsidiary CEO Lee Jung-soo / Korea Times photo by Kim Bo-eun |
Hong Kong subsidiary accounts for over 80 percent of securities firm's overseas earnings
By Kim Bo-eun
HONG KONG ― Korean financial firms are seeking to expand overseas operations as they face limits in the domestic market. But as relative latecomers and foreign entities, overseas expansion has proven a difficult task due to substantial barriers to entering overseas markets that are dominated by larger existing players.
NH Investment & Securities, which has been in Hong Kong since 1994, has managed to beat the odds and establish itself in the local market. The securities firm was formerly owned by the conglomerate, LG, and then by Woori Financial Group, before being acquired by NongHyup Financial Group in 2014. NH is one of the largest brokerages in Korea, and the Hong Kong subsidiary is among the best-performing of its Korean peers.
The scale of overseas earnings of Korean securities firms still accounts for a small percentage of the total earnings, but the companies are intent on scaling this amount up.
The Hong Kong subsidiary accounted for more than 80 percent of the net profit of the company's overseas subsidiaries, more than 60 billion won ($46.3 million) last year. Other than Hong Kong, NH Investment & Securities has subsidiaries in Vietnam, the U.S., Singapore, Indonesia and China.
"Gaining a foothold in the market has taken many years of building relations and trust with clients ― something that cannot be accomplished during a three-year stint, which is the usual length of assignments to head subsidiaries," Lee Jung-soo, who heads NH Investment & Securities' Hong Kong subsidiary, said. Lee came to the Hong Kong subsidiary in 2011.
With a longer-term view, Lee has been behind the set-up of the firm's business here. The company's business in Hong Kong currently focuses on investment banking services, including arranging financing for global clients such as private equity firms. NH is also involved in fixed income sales and trading, as well as stock brokerage services for investors in the Hong Kong, China and Korea markets.
"In the end, it comes down to doing business with capital ― as profitability is limited for brokerage services," Lee said.
"What I tell my colleagues is that we need to build up our capabilities by developing our human talent, expanding networks and increasing capital," he said.
But at the same time, he noted the importance of risk management in the company's business, as inflation is set to weigh in on businesses, consumers and markets.
"In previous years, there was a lesser extent of credit risk. But this year, the market is expected to be tough given companies' profitability will be affected as costs rise and sales slow, with inflation weighing on consumers' purchasing power," Lee said.
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| Lee speaks during an interview with The Korea Times, at the company's office in Admiralty, Hong Kong, June 22. Korea Times photo by Kim Bo-eun |
Hong Kong has gone through a number of major events in recent years, such as months of protests and police confrontations over the controversial bill proposing extraditions to the mainland in 2019, the passage of Beijing's national security law that limits freedom of expression in the city in 2020 and the city's relentless, strict zero-COVID measures since the outbreak of the pandemic. This situation has led to a significant outflow of the city's vast foreign national workforce and a growing sense of concern as well as uncertainty.
But Lee shares the prevailing view of the financial industry that Hong Kong will continue to play the role of a financial hub.
"Hong Kong continues to serve as a conduit between China and the world and a destination for initial public offerings," he noted.
Lee has paid attention to hiring and retaining talent over the past decade, a feat that is becoming an increasing challenge for businesses in Hong Kong of late. NH Investment & Securities has employees from countries including Singapore, the U.K. and Canada, as well as China.
"Human capital is key to a financial firm's competitiveness, so much attention has been put into offering decent compensation. We value the input of colleagues working at the forefront and see that it is heard and reflected," he said.
In the mainland, NH has a subsidiary and office, each in Beijing and Shanghai. The business there involves advisory services for M&As, such as when Korean investors seek to acquire Chinese entities.
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