Adapt to compete strongly, merchant banks told


KUALA LUMPUR: It is critical for the country to have a strong domestic capital market that is not dominated by foreign players, said Commerce International Merchant Bankers Bhd (CIMB) chief executive and managing director Mohamed Nazir Abdul Razak. 

“Foreigners will be competing more effectively in our capital markets where trading and market making will become the core activity in investment banking,” he said in his presentation entitled Investment Banking – What's Next, What's New at the 2003 Malaysian Banking Summit here yesterday. 

Overall, Nazir sees exciting times ahead for the investment banking industry in Malaysia. “There are huge opportunities as the domestic capital markets are still young,” he said. 

He said merchant banks, the capital market arm of banking groups today, needed to transform themselves to compete effectively with further consolidation being very likely. 

“Our niche has shifted from advisory to markets that are much riskier, more capital intensive and very complex to manage,” he said. 

Nazir said the country's Financial Services Masterplan envisaged the merger of intermediaries such as the merchant bank, stock-broking company and/or discount house into an investment bank to be co-regulated by Bank Negara and the Securities Commission. 

“Investment banks are required to be members of stock exchanges and be focused on the capital markets,” he said. 

Alliance Merchant Bank Bhd chief executive officer T. Jeyaratnam said although domestic players in the investment banking industry had a localised brand, cultural know-how and client relationships, they would be facing stiff competition from global players with access to international markets, strong distribution channels and a wide range of products and services. 

“It would be good for us to form partnerships or alliances with the global players to strengthen ourselves in certain areas,” he said. 

In his presentation, Jeyaratnam said the key factors to focus on to become an investment bank were human capital, risk management, distribution channels and international best practices. 

In order to meet the challenges in investment banking, he said those involved would need industry knowledge, good execution skills as well as be innovative.  

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