Major Stock Rivals Jointly Advance Into HK Market

An oral agreement between the CEOs of archrivals Daewoo Securities and Samsung Securities has led to cooperation after they launched divisions for communication and profit-sharing.

Daewoo established a syndicate department and Samsung a global market team. The two brokerages are targeting high value-added projects, including IPOs, M&As and issuance of securities for capital increase with consideration.

Both companies are using Hong Kong as the beachhead for their joint advance into foreign markets. They chose to compete with leading global companies there because the Chinese city is overtaking New York as a world financial hub in the wake of the global economic crisis.

According to the World Federation of Exchanges, the number of company IPOs last year was 35 on the New York Stock Exchange and 66 on the Hang Seng Index of Hong Kong.

Ranked first in the Korean securities market, Daewoo has greatly reinforced its Hong Kong operations. It changed its reporting system to let its overseas affiliates in London, Beijing and Hanoi, Vietnam, inform the Hong Kong affiliate of their performance results.

No. 2 Samsung hired 55 staff in Hong Kong last year in stepping up its advance into the city.

The two companies apparently agree on the importance of Hong Kong in becoming the first rivals in the Korean securities industry to make joint inroads into a foreign market.

They have fiercely competed over market share in the smaller Korean market, with each claiming the lead in market share, net profit and total assets. Analysts say the two joined in large part to the lifelong friendship between their CEOs.

Daewoo Securities CEO Im Key-young and Samsung Securities CEO Park Joon-hyun both graduated from Incheon Middle School in the same year and went on to study together at Jemulpo High School. The two competed for the top spot in scholastic performance, sitting in the front and back of their classes.

They finally attended separate schools after entering college, with Im majoring in economics and Park in law. Yet they met again in the financial industry as Im joined Korea Long-term Credit Bank and Park was hired by Samsung Life Insurance.

Im said, “The market capitalization of a large Korean brokerage house is up to four trillion won (3.5 billion U.S. dollars), or just about three percent of that of a global financial company,” adding, “Our collaboration to secure a large deal overseas was made possible in large part by our lifelong friendship.”

Park said, “We’re always ready to cooperate with the best company in a given area in addition to Daewoo Securities,” adding, “Apart from being my friend, Mr. Im is part of the power elite in the Korean securities market.”

artemes@donga.com