There is little doubt that the offshore branches of Chinese securities houses have changed the face of Hong Kong’s capital markets. From the city’s all-important new listing market to its place as a hub for offshore bond issuance, rival bankers have been forced to take notice of these aggressive upstarts.
They have certainly noticed Haitong International Securities, whose chief executive is Lin Yong. The firm enjoys an enviable position among securities houses in Hong Kong, managing to boast a strong position in a variety of different markets.
It has built an impressive equity capital markets business. It has worked on everything from high-yield bonds to debt issues from state-owned banks (although it has a clear preference for lucrative high-yield transactions). In 2017, it was one of the three most active brokers for both the Shanghai and Shenzhen Stock Connect links, helping to give foreign investors access to China’s equities market.
Hong Kong’s ECM market is still dominated by the world’s biggest banks. The market is a crucial avenue of capital-raising for Chinese companies, and as a result, Chinese, European and US banks put some of their best people in Hong Kong to win deals. But Haitong has quickly rivalled them.
The firm got league table credit for $6.5 billion of deals in 2017, according to Dealogic. That is a shade below JPMorgan and only $300 million behind Goldman Sachs. It was enough to put Haitong in 12th place in the league table ranking bookrunners on an apportioned basis, seven places above its nearest rival, Guotai Junan Securities.
Haitong slid eight places down the league table between January and August, but the firm is unlikely to complain. Its apportioned deal volumes rose to $8.26 billion across 20 deals, an impressive increase for a firm that is still considered a disruptor in Hong Kong’s ECM market.
Can Haitong keep this up? The firm has clearly suffered a drop in its dollar bond business. It had managed 66 deals worth around $19 billion by August 27, 2018, down from $31.7 billion over the same period last year. Part of that fall reflects tougher conditions in the G3 bond business in Asia ex-Japan, which experienced a volume decrease of more than 15%. But Haitong will need to prove it can keep swallowing market share from its bigger rivals.
Is that to judge the firm too harshly? Haitong’s big rise suggests that securities houses should not be judged by lighter standards than those used to rank the top investment banks. Haitong has been in the vanguard of a revolution in Hong Kong’s market, becoming a firm about which every rival – friendly or otherwise – has an opinion. No firm deserves this award more.