Securities house of the year: Haitong International

Asia Risk Awards 2019

Duke Du, Haitong International

Despite the market downturn this year Haitong International has continued to expand its wealth management and corporate financing businesses, cementing its position as the go-to securities house for Chinese corporates and investors looking to access global markets.    

Growth across HTI’s wealth management business – serving retail, high-net-worth and ultra-high-net-worth clients – was particularly strong, with average daily revenue increasing by 20% in 2018. The bank says that it is now hiring more relationship managers to support this growth, although it did not give figures.

Investors from China particularly value HTI’s enduring Chinese identity, complemented by a global reach that means they can offer local quality investment services on an international level. 

“Our mission is to become a leading financial institution of Chinese background, of systematic importance and with a global presence. We are working towards this objective and we are trading around the clock and throughout the markets,” says Duke Du, executive committee member and managing director of Haitong International.

Haitong International has identified Chinese clients as the fastest-growing segment for wealth management services and plans to remain keenly focused on this area.

Du says that Chinese clients are getting more and more sophisticated and increasingly looking for global diversification across different asset classes. With offices in New York, London and Asia-Pacific markets, such as Tokyo, Sydney and Singapore, HTI is well-placed to meet this need.

Our mission is to become a leading financial institution of Chinese background, of systematic importance and with a global presence

Duke Du, Haitong International

Those same strengths have been equally important to the success of HTI’s equity and debt capital markets businesses, where the securities house has had yet another stellar year.

In 2018, HTI completed 43 equity financing projects globally, including initial public offerings – more transactions than any other investment bank in Hong Kong, according to Bloomberg data. The data also shows that in the year prior to June 2019, HTI’s debt capital markets team executed 162 G3 currency bond issues in Asia ex-Japan, raising $8.5 billion. A further $5.3 billion was raised with 91 high-yield US dollar bond issues, more issues than any other global financial institution.

In one landmark transaction, HTI served as joint sponsors, global co-ordinators, book runners and lead managers for the November 2018 Hong Kong IPO of Babytree Group, China’s largest parenting website.

Although the owners of Babytree were forced to cut the size of its offering amid a major sell-off in the equities market, HTI used its extensive distribution network to secure orders from an array of institutional investors including Millennium, China Universal Asset Management and Indus Capital, helping the company to raise a total of $281 million.

“Through the orders of institutional investors HTI built a strong and solid foundation for the success of the IPO,” says Wang Yu, corporate finance director at Babytree Group. “HTI displayed great ability in marketing to investors and building up momentum for the deal.”

She says that Haitong expertly combines Chinese culture, language and roots with international competitiveness and brand influence, adding real value to the market.

Leaders in warrants

In Hong Kong’s listed structured products market, HTI continues to hold its own against the large global investment banks that have long been the dominant issuers and market makers.

The securities house was, in fact, some distance ahead of its rivals in the single-stock warrants market as measured by total turnover in 2018, which stood at roughly HK$570 billion ($72.7 billion). In August the same year, Haitong International began to issue index callable bull and bear contracts (CBBCs) for the first time, achieving monthly notional sales of just over HK$4 billion ($510 million) in the space of just eight months, representing 11.47% of the entire CBBC market.

The timing of HTI’s entry into the CBBC market was ideal, with implied volatility on Hong Kong stocks soaring in the latter part of the year due to the escalating trade war between the US and China. Unlike warrants, CBBCs trade at a price that is not affected by movements in implied volatility – making them more attractive to investors in whipsaw markets.

HTI’s rapid growth in Hong Kong’s listed products market owes much to its decision to focus issuance on single-stock, second-tier names often ignored by global investment banks.

On the Hong Kong Exchange, HTI has been the exclusive issuer of warrants on names such as Greentown China, Esprit Holdings, Cosco Ship Port, Ali Pictures and H&H International Holdings.

To issue warrants on the stocks of these companies, HTI has capitalised upon a knowledge and familiarity with Hong Kong and Chinese companies that foreign investment banks lack, says Du.

From a hedging standpoint, there are not always listed options to cover some of these securities, which means that research and knowledge capabilities become even more important, since a securities house will need to take a position as to how comfortable it is with the risk they are taking on.

“Haitong International is proud of being one of the leading players in the issuance and market making of such products… we [help] provide the liquidity to the markets and make them more efficient for our clients,” says Du.