Wilson Wan (right) and Sam Lee aim to make a difference and change the game in the city's investment banking sector. Photo: Jonathan Wong

China Merchants Securities plans to add about 100 jobs at its Hong Kong unit this year in a bid to become one of the top 10 investment banks in the city for equity and debt capital market business.

Wilson Wan, the chief executive of China Merchants Securities (Hong Kong), said he aimed to double revenue at the unit in the next three years in working towards that goal, competing with the likes of Goldman Sachs and Morgan Stanley.

Commodities futures trading will also be a focus.

"We want to be one of the top 10 in Hong Kong's equity and debt capital markets and I believe we have the ability to do so given strong support from our parent group and close relationship with major mainland company clients," Wan told the South China Morning Post.

China Merchants Securities, a subsidiary of China Merchants Group, is the mainland's sixth-largest securities house by assets.

Wan, a veteran investment banker who took the helm in Hong Kong in July 2012, said he planned to bring the company's payroll to 470 by the end of this year under his hiring goal.

"We want to transform our business model from a conventional securities brokerage firm into a full-service investment banking platform," he said, adding the firm would focus on the so-called FICC business - fixed income, currencies and commodities - and leverage finance.

"That's the new direction for us to make a difference and change the game."

Hong Kong has been one of the world's most competitive battlefields for deal-hungry investment bankers in the past decade. Last year, it was ranked second for initial public offerings after New York, by capital raised.

In addition to Shanghai-listed Merchants Securities, the century-old industrial parent firm also controls China Merchants Bank, the mainland's sixth-largest by assets, and China Merchants Property Development, a major real estate company.

Head of research Sam Lee, who covered Asia's transport sector at Credit Suisse before joining Merchants Securities' Hong Kong unit last year, said the company aimed to fill some new positions in the research department, particularly to boost coverage in the insurance, property, gaming, technology and internet sectors.

"We're hiring analysts now. We are also searching for seasoned equity sales managers," he said.

Last year, Merchants Securities set up a subsidiary in London to expand into global capital and commodities markets, with a focus on derivatives.

Wan told the Post the company expected to gain clearing membership of the London Metal Exchange in the first half of this year and its London office would then add credit risk and compliance staff before starting full-scale operations.

"Our expansion plan in a commodity futures trading platform will also include Chicago and Singapore as trading hubs, where traders can take orders from over-the-counter markets or exchanges, such as LME and Chicago Mercantile Exchange," said Wan, a former senior banker at BOC International, the flagship offshore arm of Bank of China.

He said the commodity trading business would grow quickly to represent about 10 to 20 per cent of the broker's overall revenue this year.

Scripless trading, the final key recommendation in Ian Hay Davison's 1988 report, looks set to pass into law this year. Photo: M. Chan

Twenty-five years after it was proposed, the Hong Kong stock exchange is finally going to implement a key reform that will bring it in line with late-20th century practice.

In a city known for its efficiency, that is amazingly tardy. But better late than never.

After many rounds of consultation, the government will seek in the second quarter lawmakers’ approval to change the law to allow investors to hold their shareholdings in the form of electronic records instead of paper certificates.

Thus will the final major proposal in the Ian Hay Davison report in 1988 be adopted. The report, which followed the 1987 market crash, was the blueprint for Hong Kong’s regulatory system today. It led to the setting up of the Securities and Futures Commission in 1989 and the introduction of a consolidated securities law – the Securities and Futures Ordinance – in 2003.

With the imminent implementation of the report’s final recommendation, it is time to think about what is the next step forward.

On the securities side, no major changes are needed, but major reforms are required to the regulatory regime for insurance.

While the SFC has been in operation for almost 25 years, the insurance regulatory system hasn’t changed.

Insurance companies are registered with the government’s Office of the Commissioner of Insurance, while insurance agents and brokers are supervised by self-regulating industry bodies.

Last year, many complaints were made about the selling of complex investment-linked assurance schemes. Some investors said they were misled by sales agents or insurance brokers.

If nothing is done to plug the regulatory loopholes, more problems could arise as products become more complicated.

Why do we need an independent regulator for the insurance sector?

The Davison report said in 1988 that Hong Kong needed to set up “a single independent statutory body outside the civil service, headed and staffed by full-time regulators and funded largely by the market” to regulate the securities market and offer investor protection. This quickly resulted in the birth of the SFC on May 1, 1989.

When Davison returned to Hong Kong in 2009 to celebrate the 20th anniversary of his baby, he told White Collar “The securities regulator should be outside the civil service and its executives should be paid at a commercial rate”. He said the SFC was doing well, “as its executives are properly paid. In the old days, the regulatory jobs were done badly, as they were poorly paid and those who did the regulation were remote from the market”.

What Davison said about the securities market could apply equally to the regulation of the insurance industry.

After the change to the law to allow scripless shareholdings, the next change should be to establish an Independent Insurance Authority.

PineBridge Investments, the money manager controlled by Hong Kong billionaire Richard Li, hired Stephan van Vliet to expand a business that invests assets for insurers.

Van Vliet was named head of insurance asset management, a newly created post, and will be based in Hong Kong, PineBridge said yesterday in a statement. He had been head of investments for an ING Groep NV (INGA) unit in the Asia-Pacific region.

“There is an increased need and opportunity to coordinate and enhance the firm’s expertise and coverage in this area,” David Jiang, chief executive officer of New York-based PineBridge, said in an e-mail. “There is a general trend in the market towards outsourcing.”

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PineBridge has been working to add clients since it was sold by American International Group Inc. (AIG:US) to Li’s Pacific Century Group in 2010. The firm managed $69.1 billion as of Sept. 30, according to its website, including about $26 billion for insurers.

Van Vliet is “uniquely positioned in the confluence of asset management and insurance, bringing a dynamic perspective to this growing market segment,” Jiang said in the statement.

At ING Insurance Asia-Pacific, van Vliet was responsible for asset allocations for 10 insurers in the region, PineBridge said. He previously was head of insurance asset management at the Amsterdam-based company’s European investment manager.

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Firms Expanding

Asset managers such as JPMorgan Chase & Co. (JPM:US), Goldman Sachs Group Inc. and BlackRock Inc. have been expanding offerings and adding staff to win business from insurers. Goldman Sachs oversees more than $130 billion for insurance companies, and hired Neil Moge from JPMorgan last year to lead a London-based team. JPMorgan added a bond manager from Goldman Sachs in June.

The money managers say they can help insurers deal with increased regulation and provide expertise beyond the safest debt, with yields near record lows. PineBridge manages assets including $16.9 billion in equities, $28.1 billion in bonds, and $16.3 billion in alternatives, a category that includes private equity.

“PineBridge is particularly well placed to serve insurance clients because of its existing relationships and heritage,” Jiang wrote.

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He said van Vliet will help build a global team for insurance asset management. Clients are mainly sellers of life coverage and annuities, Jiang said.

Pacific Century was founded by Li and has also purchased Asian insurers from ING for more than $2 billion. Li is the son of Li Ka-Shing, Asia’s richest man. ING has been divesting units in North America, Asia and Latin America to comply with terms of its 2008 bailout.

PineBridge hired Jiang as CEO from Bank of New York Mellon Corp. in 2012 as it worked to reduce ties with AIG. The business had been used by New York-based AIG to invest its own funds before AIG sold it for about $500 million to raise cash to help repay its rescue by U.S. taxpayers.

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To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net