Focusing on Overseas Market
Samsung Securities will acquire a stake in Dragon Capital, the largest asset management company in Vietnam. Samsung Securities is aiming to accelerate its inroads into the Vietnamese market by acquiring a stake in a local asset management company rather than establishing a corporation, a general overseas advancement type. This move hints that since the issuance of a bill of lading, one of the main tasks of a large investment bank (IB), was suspended in South Korea, Samsung Securities turned their eyes overseas not to lag behind its competitors.
According to the securities industry and financial authorities on September 6, Samsung Securities will acquire Dragon Capital shares by partnering with Caldera Pacific, a Hong Kong private equity fund. Samsung Securities is planning to share and report on the acquisition of a stake in Dragon Capital in a board meeting on July 7 and wrap up the final contract. Samsung Securities and Caldera Pacific will jointly become the second-largest shareholder with a 40% stake in Dragon Capital. Caldera Pacific will participate as a GP and Samsung Securities as an LP.
Samsung Securities will own about 10% of the whole stake in Dragon Capital. It is known that Samsung Securities will shell out a considerable portion of funds for the acquisition of Dragon Capital.
Dragon Capital is the largest asset management company with assets amounting to one trillion won (US$900 million) under management in Vietnam. The Vietnamese company also played a role as a bridgehead for Hong Kong capital's entry into Vietnam. "The opening of an office or a corporation, a general overseas advancement form, takes a lot of time from the input of money to the results. But the takeover of a stake in a local asset management company allows a company to efficiently secure a sales network and infrastructure effectively," an official familiar with the acquisition said.
Unlike Mirae Asset, the Shinhan Financial Group, and Korea Investment, which all set up their corporations in the early stages of their operations in Vietnam, Samsung Securities has no bridgehead to the Vietnamese market except for strategic alliance forged with Ho Chi Minh Securities in March. Thus, market experts say that there is a possibility that Samsung Securities will additionally acquire stakes in other companies with this investment as a beginning.
Currently, five Korean securities firms -- Mirae Asset Daewoo, NH Investment, Korea Investment and Securities, Golden Bridge and Shinhan Financial Investment – have seven offices or corporations in Vietnam. Korea Investment & Securities increased its stake to 98.2% by investing an additional 44 billion won after launching KIS Vietnam by acquiring a 49% stake in EPS Securities in Vietnam. KIS Vietnam, which hovered about the 70th level only among the top 100 securities companies in Vietnam, increased its market share in the brokerage market nearly 5% from 0.25% in five years. NH Investment Securities entered the Vietnamese market by establishing its Ho Chi Minh office in 2007. In 2009, the company is invading the Vietnamese market with great growth potential by acquiring a 49% stake in Vietnam CBV, a local securities company. NH Investment & Securities is currently in negotiation with CBV to ramp up its stake in CBV to 100%.
However, as external uncertainties increase and overall overseas sales performances of Korean securities companies are on a downward spiral, financial authorities are paying attention to risk from overseas. Last year, brokerage firms' overseas branches suffered a net loss of US$4.5 million due to a spike in selling and administrative expenses related to loss on valuation using equity method of accounting of some overseas branches and the provision of the prime brokerage service (PBS). Large Korean securities firms that made a foray into Vietnam also set their goals of expanding new business items such as IB and PBS, breaking away from brokerage-oriented sales.