Investment Banking-r2:AMM grid in qxp 12/24/09 9:33 AM Page 30
INVESTMENTBANKING
WhileDaiwamayhavemissedtheidealopportunitytoexpandinAsia,its firstJapaneseaffiliatetolead-managebondissuesbyChinesemainland
planstodosonowaremuchmorelikelytosucceedifitreallymakesagoof companies,andisawaitingapprovaltolead-manageIPOsonChiNext,
it. theNasdaq-styleexchangeinShenzhenthatopenedattheendofOctober
Thatincludesadjustingpayandworkingpracticestonon-Japanese andnowlists28companies.
norms.Hibino’stalkofoffering“competitive”compensationtonewhiresisa ThankstothisJV,“wearetheonlyJapanesesecuritiescompanythat
goodstartingpoint. canunderwriteAsharesinChina,”Hibinonotes.
Thebankhasachance,provideditcommits.AnanalystforaWallStreet ThiswillproveitsworthwhenChinaallowsforeigncompaniestolist
investmentbankinTokyocomparesDaiwa’smovetoHongKongto onmainlandmarkets,probablyin2010(seerelatedstoryonpage25).
DeutscheBank’sdecisiontotransferitsEuropeaninvestmentbankfrom HibinoiseagerforauthoritiestoopenmainlandmarketstoJapanese
FrankfurttoLondon,followingits1989purchaseofMorganGrenfell. issuers.
“WhileChinaisstilldeveloping,noonecanbuildthenucleusofanAsian “WecanintroduceaJapanesecompanytoShanghai,forexample.
investmentbankapartfromJapan,”saystheanalyst.“JapanhasNomura,it ThatisabigadvantagethatwehaveoverNomura.”
hasDaiwa;iftheyarewilling[theycan]trulycreatesomethinginHong Theplanssoundreasonable,butremarkablysimilartothoseofevery
Kongnow.” othermajorinvestmentbank.
ThatisDaiwa’sbiggesthurdle.Itfaceshugecompetitionbesides
CHINAADVANTAGE Nomura,andmuchofitisentrenched.Setagainstthem,Daiwadoesnot
ButwhatcanDaiwaoffertoenticebusinessfromaChinesecorporate? appeartohaveaconcreteadvantage.
Suzukisuggeststhatthebank“couldbeaglobalcoordinatorifacompa- Waterhousenotesthatitwillrequire“enormousinvestmentinfacili-
nywantstolistontheTokyoStockExchange(TSE).” tiesandresources”forDaiwatorealiseitsAsianambitions.
Thepointseemsspurious,giventhatthevastmajorityofAsianIPOs “Youhavetounderstandnotjustthemarket,buttheplayersinthe
bypassJapan’smainbourse.“WearelobbyingtheTSEtoloosentheirlisting market,aswellasthecompaniesyouarecovering,”hesays.“It’saformu-
requirements,”Suzukisaysinresponse. lathatmanyhavetriedandfewhavesucceededwith,andI’mnotsure
Infairness,DaiwahasbeeninvolvedwithChineseIPOsalready,includ- thatDaiwahassufficientlydeeppocketstoreallymakethekindofinvest-
ingthoseofBankofChina,ICBC,ChinaConstructionBankandBankof mentsthatareneededasaverylateplayertobecomenumberone.”
Communications.However,ratherthanactasaleadbookrunner,ithelped
theseissuersconductpublicofferingswithoutlisting(POWLs). LOOKINGISOLATED
POWLsareunlistedtranchesofstocksallocatedtoJapaneseretail ForallthechallengesDaiwafacesinAsia,itcandrawonemeasureof
investorsbutofficiallyretainedbythesecuritieshousedistributors,who comfort.
thentradethemoninstruction. Theratingagenciesgenerallyfavouritsrelativelystableflowofearn-
It’slongbeenaprofitablesourceofbusinessforDaiwa.Daiwaarranged ingsoverNomura’srollercoasterofabalancesheet,largelyaconsequence
nineChinesemainlandPOWLsfrom2005to2007indealsvaluedat ofitsinternationalambitions.
US$51.9billion.Nomuraarrangedfiveinthesameperiod,valuedatUS$42 “Nomurahadalossof¥700billionlastyear,andmostofitcamefrom
billion. overseasmarkets.Ontheotherhand,Daiwadidn’thaveanyUSsub-
“WehaveahugeinvestorbaseforChineseequities.Weknowour prime,theydidn’thavemuch[inthewayof]monoliners…orstructured
investors,andwhattheywanttobuy,”Suzukisays. products,”Syedpointsout.
HibinoaddsthatDaiwacouldbenefitfromitsJVwithShanghai Nomura’srevenuevolatilityisunlikelytodecline,giventhebank’s
Securities.EstablishedinNovember2004,theJVnowhas61staff.Itwasthe commitmenttoamajorinternationalpresence.ButDaiwa’srevenues
couldwellbecomemorevolatiletoo,asitseekstodiversifyawayfroma
domesticmarketinwhichitsbank-backedrivalsareflexingtheirmuscles.
PHANTOMPOTENTIAL
YetMakiHanatate,vice-presidentandseniorcreditofficerforfinan-
cialinstitutionsatMoody’sJapan,saysthatonethingshouldberemem-
beredamidthisuncertainty.BothDaiwaandNomurahavecurrent
Daiwahasastrongdomesticfranchiseinretailbrokingandassetmanage-
accountsattheBankofJapanandareeligibletoreceiveemergencyloans
ment,andseesfurtherscopetogrowiftheoft-foretoldshiftofhousehold
fromthecentralbank,usingJapanesegovernmentbondsascollateral.
assetsfromcashdepositstoinvestmentwouldonlyspeedup.
“IntheUS,brokeragesdidnothavethisaccess,whichiswhythey
“ThetotalvalueofhouseholdassetsinJapanamountstoabout¥1,400
turnedintobankholdingcompanies,inordertoqualifyforliquidityfrom
trillion(US$15.77trillion),butoutofthatonly17%isintheformofsecuri-
theFed[eralReserve],”shesays.
ties,sothereisstillsignificantroomforustoexpand,”saysCEOShigeharu
Daiwa,inparticular,mayneedthisadvantage.Ithaslostthealliance
Suzuki.
withamajordomesticcommercialbankatatimewhenrivalsareseeking
“PeopletalkabouttheflowofJapanesesavingsintoinvestments.
alargersliceofthebrokinggame.Plusitlacksthesizeandinternational
Sometimesthisflowisfast,sometimesslow,butthereisdefinitelymove-
scaleofitslargestrival.
ment.Wecanobserveit.”
Thebigger-picturetruthisthatDaiwaandevenNomuralookvulnera-
Oneofthefewstirringsinanotherwisestillpondinthequarterending
ble.
September30wasa34%increaseinsalesofequityinvestmenttrusts,to
“IthinkthenextoneortwoyearswillbecrucialforDaiwaand
¥431.6billion.
Nomuratoremainindependent,”saysS&P’sNemoto.“Theyneedtohave
Thelatestripple:DaiwastartedsellingaBrazilianstockfundon
stableearnings.Iftheyhavetwoconsecutiveyearsoflosses,both
November2.It’sproventobeabighit,withsalesalreadytopping¥93billion.
Japaneseandforeignbankswillbeveryreluctanttolendmoney.Evenif
ThepotentialofJapan’shouseholdsavingsissofrequentlyreferredtoby
theyjustlosemoneyinthethirdandfourthquarters[ofthisfiscalyear],
thecountry’sbrokersandbanksthatitrisksbecomingclichéd.Butnotevery-
bankswillbecautious.”
bodyisconvinced.
Daiwahasdecidedtogoitaloneathome,whiletreadinginthefoot-
TakeMakiHanatate,vice-presidentatMoody’sJapan.
stepsofitsarch-rivalinAsia.Butitneedstoprovethatthedissolutionof
“Wecannotexpectrapidgrowthinthefuture,becausethepopulationis
theSumitomoMitsuialliancewillnotimpactitslocalrevenues,and
goingtoshrink,andwecannotexpectagreatincreaseinGDP,”shesays.
demonstratethatitcanpullinmoremoneyfromAsia.
“That’swhyDaiwaandNomuraaretryingtodiversifyoverseas.Theycannot
Analysts,banksandinvestorsareunconvinced.AndSuzukiislikelyto
makeenoughmoneyinthedomesticmarket.”
findhimselfsubjecttomanymoreexasperatingquestionsinthemonths
ahead.
30 DEC2009/JAN2010 ASIAMONEY
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