Daiwa steps up Asia focus with equity hires

Japan's Daiwa Capital Markets has stepped up its $2 billion Asia expansion with two new senior equity hires and plans more to help it tap investor demand for emerging market growth, a top executive said.
The hire of Ali Khan as head of Asian equity sales and Alex Lewis in the same department were a key part of parent company Daiwa Securities' strategy to carve out a specialist pan-Asia niche, regional Head of Equities Meurig Williams said.
Long-time Goldman Sachs employee Williams, himself a recent hire as part of a 25 percent rise in European headcount over the last two years, said Daiwa was looking to build its presence "in rank order" Hong Kong, China, India, Korea and Taiwan.
Khan joins from Deutsche Bank after a four-year spell running equity sales into India, and has 17 years experience covering the Indian capital markets, but will now expand his brief at Daiwa, said Williams. Based in London, he will lead a team including Lewis, hired in January from hedge fund Marble Bar Asset Management, where he was chief investment officer of the 650 million pound Pan-Asia Fund, and who also has extensive sell-side experience through stints at ABN Amro and Lehman Brothers.
"Khan has been a constant in Indian broking in Europe over the past 17 years as India has moved from being a frontier market to being a critical component of almost all Asian portfolios. This gives him a huge range of important institutional contacts in this region," said Williams. "What he represents for us, in terms of hiring is a real step towards penetrating the biggest payers in the region," said Williams. While previously a marginal player in some Asian markets, the new hires gave Daiwa "a chance to become a core player" as it looks to tap European investor funds. Daiwa Securities, Japan's No 2 brokerage, announced its expansion plans in November 2009 and, after buying out Sumitomo Mitsui Financial Group's minority stake in Daiwa Capital Markets, the growth has continued apace.
In contrast to domestic rival Nomura, which has sought a more global presence, Daiwa aimed to double its Hong Kong headcount to 1,200 and expand its footprint elsewhere in Asia with the aim of doubling capital in Asia to $2 billion. Last month Daiwa returned to profit and announced plans to cut over $350 million in costs over three years.
The firm's eight stock exchange seats in Asia give it good access to local markets, said Williams, while plans to boost the number of analysts to more than 100 over two years and double the number of companies covered will also help. Its research "now ranks with some of the bigger houses in volume terms and our next task is to convince our clients it is comparable in terms of quality. I think in certain areas it definitely is, others we still have it to prove," said Williams.
"Our intention is to put in place a distribution team that can sell the products made in the research factory in Asia." Other key steps in its build-out include the $1.2 billion buy of Belgian banking group KBC's Asian Derivatives unit last July, which boosted Daiwa to a top-3 position in the Hong Kong warrants market.
"So the firm's strategy has been to acquire and add businesses that can make Daiwa more relevant not only to traditional investors, but also to some of the hedge fund investors," Williams said, citing the expansion of its derivatives unit and build-out of synthetic prime brokerage.
"It's about building a toolkit which is competitive for hedge fund clients," Williams said, and Lewis who had "run long-short money with live ammunition", was a key part of that. In 2010, Daiwa Securities ranked 19th globally in debt, equity and equity related issuance, according to Thomson Reuters data, but was outside the top-20 when debt issuance is excluded. To help narrow the gap to the top table, "we're definitely looking to grow our headcount," Williams said, although the top 5 positions would be hard to crack outside Japan.
"We're aiming to be an important pan-Asian equity house. We're not a global bulge bracket firm, we recognise that. The realistic target for us is not to be number one, but to be a significant pan-Asian regional house." "We are, at the moment, systemically important in Japan and increasingly important in Asia," Williams said.