Lee Jim Leng, Lee Wai Sing, Cheah King Fui | Hong Leong Investment Bank | Video

World Finance interviews Lee Jim Leng, Lee Wai Sing, and Cheah King Fui from Hong Leong Investment Bank discuss capital markets in Malaysia

December 19, 2013

Malaysia’s capital markets are booming: last year assets under management grew nearly 20 percent to over $150bn. Hong Leong Investment Bank has capitalised on this growth to expand into the region; its CEO Lee Jem Leng, CRO Lee Wai Sing, and Head of Treasury Cheah King Fui, discuss the challenges and opportunities in Malaysia, and the trends in the capital markets moving forward.

World Finance: Tell us more about this expansion.

Lee Jim Leng: OK, in terms of expansion, we have basically achieved what we consider ourselves in Malaysia the mature stage, where among our competitors our earnings have grown to a stage where we are fairly comparable to our competitors. So the next phase of growth that we are looking for in terms of expansion will be the regional markets, and the first being of course Singapore which is a place closer to home. And the next will be we’ll hope to work on with our sister company in Hong Kong, where we are hoping to use our same level expertise to build on our homegrown brand, and create the same level of business that we hope to achieve out of these markets.

“Our clients are looking to expand beyond the Malaysian shore, and we are there to expand along with them.”

World Finance: What challenges have you faced and how have you dealt with them?

Lee Wai Sing: Well, for the last couple of years I think the most challenging part is the increase in regulations. We have definitely a lot of guidelines to adhere to, for example there is Basel 3, and there is ICAP. So with that the cost of capital has increased, so for us to maintain the older rate, to do the particular transaction is getting more and more difficult because the margin has been compressed, and with that, as an investment bank where most of our assets are traded, you’re not the first to meet the net stable funding ratios and the Basel 3 liquidity requirements. It’s a bit hard because most of our deposits are mainly corporate sites, and for wholesale interbank deposits are not taken into account as stable deposits, or stable liabilities for that matter. And of course, on managing the volatility of the market, whether it’s credit or interest rate, is difficult for us as well because we do not really have a stable policy of default, which is published specifically for Malaysia, so for the assets class that we trade it in it’s very difficult to calculate the credit risk capital charge for the particular assets, unless we are doing a standardised approach, so that will make our cost of capital a lot higher. And with that of course, market competition would definitely decrease the margins that we are going to make, and I think moving forward is definitely going to be more challenging.

World Finance: Looking to the future, how is the industry going to change?

Cheah King Fui: Our clients are continuously looking at new ways of raising funding, as well as financing, and we are there to help our clients. We are the first to raise SPAC financing in Malaysia, in fact we did the first and the second SPAC in Malaysia, and our clients are also continuously looking to expand beyond the Malaysian shore. They’re expanding regionally as well as globally, and we are also there to expand along with our clients, and along with it to help them come up with innovative financing as well as fundraising. In terms of investors, they are also expanding beyond the Malaysian shores. That’s where we will come in to help them as well.

World Finance: There have also been opportunities during this process. How have you been able to capitalise on those?

Lee Jim Leng: We see that the market has recently been active with a lot of mergers among the big bracket banks, especially CMB, they just bought into RBS. MayBank, another dominant investment bank, have bought into Kim Eng. In the middle of all these mergers, we see a lot of competitors being disrupted by integrating the so called operations and cultures among the two entities. We saw a lot of opportunities where we can catch up with our competition and stay close with our clients, and during this process we’ve been able to successfully garner market share, and in this process also we’ve been able to actually bring some first-to-market initiatives. For example, we listed the first pac on the Bursa Malaysia, we also were the first to do a Tier 2 bond for an insurance company, which has not been done in the Malaysian market. So that helped us when our competitors are busy, for us to make some traction into the market and gain market share. So being opportunistic in this instance has actually borne us some first to market deals and in the process, also we listed one of the most innovative REIT and we actually one an award for that by Alpha Assets.

“In each of the markets that we operate in, we hope to be judged as one of the top few investment banks the industry.”

World Finance: So what are Hong Leong’s future aspirations, and how will you achieve them?

Lee Jim Leng: In as far as Hong Leong is concerned, we hope to build along with our commercial bank. As you’re probably aware, we are part of a bigger financial group that manages across a whole spectrum of financial services, as Hong Leong builds its footprint among the regions. As you’re probably aware, Hong Leong Bank has set up operations in Cambodia, we have a fully fledged licence in Vietnam, and we also have an associate, Bank of Chengdu in China. So as they grow, we hope to also be able to grow along with the financial group and expand into a relevant investment bank in the region. As far as investment bank’s aspirations, of course, in each of the markets that we operate in, we hope to be judged as one of the top few in the industry. As for what we have done in Malaysia, we are fairly happy with what we have achieved, and of course winning this award is one of those. But in terms of the market share, league table positions, we are very happy with what we have done and achieved for the last four years since we started in Malaysia, and so for the regional markets we hope to be able to replicate that, and we hope to be able to do just as well, and be able to make a significant presence and also to be an innovative financial services institution in each of these markets that we operate.

World Finance: Thank you.

All: Thank you Eleni.