THE deal flow in the competitive investment banking space in Malaysia has been slow this year.
But thanks to its regional reach, Maybank Investment Bank Bhd (Maybank IB), which goes by the name of Maybank Kim Eng outside Malaysia, has been able to maintain its performance. Of its total income from investment banking and stock-broking activities, about 50% comes from outside Malaysia. Last year, Thailand was the shining star and this year, it is the Philippines. Next year, Indonesia and Vietnam are touted to be the markets to watch in the region.
“Our reach has helped us. We have local presence in 10 countries across the region. We know the regional markets quite well – the local companies and the people,” says the chief executive of Maybank IB John Chong.
Maybank IB’s workforce of 3,000 includes about 1,000 brokers in Thailand, where remisiers are considered as part of the investment bank. Maybank as a group, under president and CEO Datuk Abdul Farid Alias, had put in place a strategy for Asean more than a year ago before Malaysia went on to head the Asean Economic Community (AEC) this year. The theme of its 2014 annual report is Building Asean Together, where the bank described the region as on its inflection point.
The Asean strategy fitted well with Maybank IB’s acquisition of Kim Eng Securities in May 2011. It allowed the organisation to map its presence based on a structure that would be ideal for investment banks. Most investment banks would like to be present in countries where they can distribute their products such as debt papers and equities without having to incur too high an overhead. The ideal strategy is to place the lion’s share of the talent pool in countries where they can win the lion’s share of the investment banking and debt capital market deals. In this respect, the deal with Kim Eng allowed the investment bank to have a distribution network well outside local shores, going all the way to Hong Kong, New York, San Francisco and London.
At the same time, it allowed Maybank IB to have a presence in highly competitive markets such as India, where it maintains a research arm to service its clients.
“India is important but competitive. But we have a research team that provides the local insights for our clients,” says Chong.
More importantly, the deal with Kim Eng gave Maybank IB a large presence in Indonesia, Thailand, the Philippines and Singapore, where most of its deals in the region originate.
“We connect people with capital to people who need capital. The capital can be in the form of a sukuk, bond or an investment,” says Chong, who assumed the post of head honcho of Maybank IB/Maybank Kim Eng in February last year. The bank prides itself on being the global gateway for Asean because it acts like a local bank in the 10 countries where it has offices.
“We match companies with investors looking for exposure in Asean. With our regional presence working well, we think we are effective in playing the role as a bridge for companies wanting to go global and investors seeking exposure to this region,” says Chong.
“Having a wide reach helps when undertaking equity or debt capital market deals, especially for big deals that require international investors. For instance, we are able to undertake an initial public offering (IPO) for a company from Asean not just in the region but also in Hong Kong, the United States and the United Kingdom,” he says.
This year, in conjunction with the AEC, where Malaysia is the host, Maybank IB went on a road show taking investors to five countries apart from Malaysia. The other countries where Maybank IB had its investor conference were Singapore, Thailand, Vietnam, the Philippines and ending in Indonesia.
The investor conferences in these countries attracted funds with some US$10 trillion under its management. More than 150 companies with a market capitalisation of US$400bil participated in the road shows. Big names such as Mark Mobious of Templeton Emerging Markets Group were present at the Thailand event. Like other investment banks in the region, its core areas are mergers and acquisitions, raising debt in the form of bonds, sukuk and project financing, and equity capital market deals such as placements or IPOs.
Asean as a whole is estimated to have infrastructure jobs to the tune of US$7 trillion for the next 15 years.
However, its debt market is under-developed in countries such as Indonesia, the Philippines and Vietnam. In Indonesia, the total private-sector debt outstanding to the size of the economy is 55%, while the ratio is 44% in the Philippines.
In comparison, in more developed markets such as Japan, it is 200% of gross domestic product (GDP), In South Korea, it is 150% of GDP, while in Malaysia, it is more than 100%.
The debt capital market is an area of strength for Maybank IB, where it is at number three in the global sukuk market.
Chong, who started the Maybank IB debt capital market team in 2002, says that it is an area that offers a lot of potential for the bank because infrastructure projects need long-term cheap financing.
“Without long-term cheap financing, the cost will be too high,” he says.
Another area where Maybank IB is strong is in equity capital markets, where it has been ranked top for the past two years ahead of some of the international names such as Credit Suisse and JP Morgan. “We are ranked tops in equity franchise by trade value because of our understanding of the local markets,” says Chong.
This year has been a consolidation year for most banks in the country and also in Europe. Locally, the banks have been cutting down to reduce cost in view of the slowing income levels. In Europe, Credit Suisse is raising funds, Deutsche Bank is breaking its investment banking arm into two units, while Barclays is likely to limit its activities to the UK and US. But Maybank IB is not seeing any of these despite being a regional bank.