We Know Asia

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Motivation

While attending the recruitment orientation held by Yuanta Securities in the career fair, the speaker mentioned that Yuanta are now aggressively heading forward to the Asian market, with its intention to be the largest regional brokerage. After research, we realized that Asian Cup is now a primary focus. Many of them are trying to enlarge their business scale to become international companies. For example, Yuanta securities merged the Tong Yang Securities, and KGI Securities is planning an IPO in Hong Kong. How can Taiwan design our best layouts to make the overall securities industry become global? After this study, we hope to come up with a possible arrangement that will magnify the Taiwan brokerages enough to compete with other regional brokerages in Asia.

Current situation of Taiwan

The securities market in Taiwan had grown rapidly during the 80s. Our industry structure turned into IT industry then, which drew a lot of funds from the securities market. After that, Taiwan became an economy that thrived in the high-tech industry, the securities market also became flourish. However, since the securities market in Taiwan has reached a saturated level recently, and the countries in the U.S, Europe, and Asia have been expanding their securities market oversea, it’s necessary for us to expand our securities business. This is one of the reasons that we are attending the Asian Cup. Furthermore,  there is a geographic location advantage for Taiwan. We have the culture and language advantage entering the Greater China district, and the abundant funds and high liquidity in our securities market will be a great support heading forward to Asian Cup.

The preparation of Taiwan

There are several preparations of Taiwan entering Asian Cup. And the  most  important are the loosen requirements for securities brokerages’ joint ventures abroad. First, if there’s a need for the joint ventures abroad to exceed 40% of the net value, the  brokerages with capital adequacy ratio above 200% can apply the approval from the FSC  as special cases. Second, brokerages can give endorsement for financing of overseas subsidiaries. Third, the limitation of extension of monetary loans to others in the part of overseas joint ventures has been changed. The limitation has risen from 40% to 100% of  the net value.

Introduction of Yuanta Securities

Yuanta Securities has certainly been the leader role in Taiwan’s securities industry for a long period of time, but also spared no efforts expanding into overseas markets. In 1994, Yuanta Securities took Hong Kong, the important international fortress of finance as the beginning, opening its internationalized business. In 2007, Yuanta Securities entered the Vietnam market. In addition to the footholds set in Hong Kong and Vietam, it also extended to Southeast Asia and converted the worst Cathay Capital Securities in Thailand into the number one security company of market share in just two years. Last year, Yuanta Securities acquired Tong Yang Securities Inc., which is the 6th-ranked securities firm in Korea. According to the public information, the net profit in the first quarter of this year was 8.5 hundred million, comparing to the loss up to 49 hundred million last year, it really shocked the foreign investors that it turned loss into gain in such a short time.

Thus, it can be seen that Yuanta Securities has succeeded unfolding the strong layout, and has intended to keep expanding its business territory in Asia. In the future, it would  like to tie in the golden triangle country of Taiwan, Hong Kong and Korea, constructing Pan-Asian trading platform.

Here are challenges we are facing now in the security market of Taiwan.

1. Integration- If we want to compete with other large regional brokerages, the mergence in domestic market is necessary. Through this, we will be able to enlarge the scale, avoid overlapping investment, and raise our international competitive ability. As a research method, we make a prediction that the Capital Group securities is acquired by Yuanta to find a possible benefit through it.
2. Customization-With the aim of being in a dominant position in Asian Cup, the  strategy for entering oversea market is important. If we could understand our own strength and choose a suitable way to enter the target country, we may be able to beat others to it. This could be achieved by supplying specific products to different region we are entering because knowing what people need is one of the vital abilities for a multinational enterprise.
3. Risk Management-To become a regional brokerage, the ability of risk management is also important. The ability of risk management affects the level of credit rating, and it will further influence the ability to expand. Also, the Southeast area has become a popular target in Asian Cup. However, despite the rapid growth, the market there is not mature enough. As a result of this, the brokerages conducting M&As or setting branches there may face a larger risk, which makes the risk management even more

necessary. We could increase the ability through raising the amount of capital, also leading to a rising level of shift in investment..

1. Financial Innovation-Merely underwriting foreign financial instruments can earn only limited profits. If the security brokerages can develop their own product, attracting specific group to buy it, it’ll create more opportunity to make profits.
2. Restriction-Although the FSC has loosened some restrictions when entering Asian Cup, there are still plenty of rules and laws needed to be revised to help expanding. The restrictions may become a huge barrier for brokerages in Taiwan when competing with others. Also, there are limitations in entering Greater China region.
3. OSU Platform-Constructing a well-developed platform of OSU is also urgent, it’ll  help companies expand easier.

Core – Integration

In contrast to the top five banks of South Korea, Hong Kong, and Singapore, with their total market capitalization at least 50% of the local market share (which is good for promoting healthy markets), after synthesizing Taiwan's top five banks, the market share is still low. As the largest securities channel in Taiwan, Yuanta made a leap into the seventh largest bank in the country after the M&A with Ta Chong Bank, even so, it is still not large enough to keep pace with the top well-known international banks.