Peter Wong, MD and CEO of Taifook Securities. NextInsight photo.
IF REGULATORY tailwinds on the Mainland were to suddenly blow its way, Hong Kong-based Taifook Securities Group Ltd could see over half its total revenue sourced from China within just three years, skyrocketing from a still respectable 20% currently.
In an exclusive interview with NextInsight, Mr Peter Wong, Managing Director and Chief Executive of Taifook Securities Group, said that the figure stood at just 7% a decade ago.
“The growth on the Mainland is clear, and we’ve never lost sight of the China market. Without China, we’d have to reconsider our strategy in this downturn. But with China, as well as Hong Kong, we have a very promising future. That’s why we maintain our growth in good times and bad,” he said.
Mr. Wong said that as a foreign firm, it works under “very stringent” regulations in China.
“But we are positioned for more opening there. We have already laid down good foundations in China having first begun penetrating markets there in 1992 starting with B-shares in Shenzhen, and then 1995 in Shanghai. We’re definitely a player in China.”
Taifook (HK 665), a subsidiary of NWS Holdings Ltd (HK 659), last week in Hong Kong co-hosted along with investor relations firm Aries Consulting its Institutional Investor Conference 2009, themed “Winners after the Crisis.”
Mr. Wong said that this year his firm was expecting net profit growth of around 15 pct, despite the ongoing global credit crunch.
“We of course will be affected somewhat by the current financial tsunami and the hit to daily turnover in the markets. We have tried over the past few years to grow our non-equity based activity so that in these other sectors, we do see significant growth this year. But this will still not fully fill the gap in the slowdown in lost revenue from slower market turnover. Nevertheless, overall we are very healthy,” he said.
Taifook was strategically diversified across activities including asset management, fund management, and corporate finance, in both the capital markets and booking business.
“For our booking business we encompass most of the major markets around the world, and we have different channels, for our booking we aim to have securities, futures, commodities, forex, and bullion, so we have a wide variety of activities, as well as financing – market financing, share financing. So we have been affected by the slump, we have seen that the market went from around 200 billion to around 28 billion or so, but it seems like it’s crawling back."
He said the prolonged bear market was deep and had an impact on Taifook’s income and revenue stream.
“But so far we are still maintaining profitable operations, maybe because over the past year we have accumulated seven sizable client bases,” he said, adding that the firm had the largest retail client base in Hong Kong, and counted some 120,000 total individual investors among its clients, with 12 branches in Hong Kong and Macau.
Peter Wong
But Taifook was definitely eyeing Mainland China’s 1.3 billion potential clients with great fascination. The firm was still doing “a lot of market preparation and grooming” on the Mainland.
“We try to keep growth and expansion sustainable, so we don’t pay too much mind to the short term impact on the markets. That being said, I do believe Taifook has an edge, because we have very stable operations. If you look back over our past 10 years track record, we’ve kept growing, and we’ve kept investing in our people, platform and markets, so we’ve certainly kept pace on growth.”
No Lehman Brothers
Mr. Wong could hardly stifle a chuckle when asked how Taifook managed to avoid being the Hong Kong equivalent of US-based Lehman Brothers or AIG, to financial institutions that recently went under, with the later eventually winning a government bailout.
“I sit on a committee that oversees corporate governance in Hong Kong, so the issue is very close to my heart! As for our avoiding being another Lehman, I think it’s due to our managed risks. This is very important,” Mr. Wong said.
Mr Wong at the conference that his company organised jointly with Aries Consulting. NextInsight photo.
He said Taifook suffered a “very bitter experience” with the Asian Crisis of 1997, when the economies of Thailand, South Korea and Hong Kong took the brunt of the asset bubble bursts.
“At that time we lent money very aggressively, and our leverage was at around 11 times with mainly equity exposure. So we learned a bitter lesson and now we more closely control our investments. We have caps and ratio settings in place so this time we came out clean, distancing ourselves from high-leveraged products because we had that experience before.”
Mr. Wong’s many hats include one on the Hong Kong bourse’s listing committee. “I’ve seen many companies turned away due to poor corporate governance. But Taifook is very solid with good communication, both top-down and bottom-up, and we have policy cascades down to each and every staff.”
He said hosting the investor conference last week, and others like it, was very important in helping rejuvenate markets.
“We should be doing more to boost institutional confidence. One thing we can do is supply information on companies like these 14 that can provide better long-term growth, and to offer clearer perspectives for institutional investors. And also this conference can be an opportunity to remind those at securities commissions to send a message on how eager they are to ensure they are doing everything to ensure that Hong Kong will maintain its vibrancy in the financial services sector, and how much work they have done to help facilitate market development and how they have helped people know their investment will be protected.”
He said the 14 firms, some of which are dual-listed in Singapore and Hong Kong, more or less represent Taifook’s top picks in their respective sectors.
“Although this is hard to coordinate with all the different and overlapping earnings reporting seasons, we do believe that these companies provide great potential for growth, after the crisis.”
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