SINGAPORE (Mar 20): While all the brokerages crowd in close proximity at the high-density, high-rise Raffles Place area, UOB Kay Hian has been located off Scotts Road, within its own building just four storeys tall, for the past 14 years. Its main entrance is opposite an exclusive residential area, and rows of foliage line the compound. Unfortunately, the company will soon be moving. The government will not allow the 15year land lease to be extended. “We have a nice, quiet campus feel here. The remisiers, the staff all like it,” says Choo. UOB Kay Hian has already identified a few new locations.
The physical location might move, but business will go on — as it had for the past 50 years.
UOB Kay Hian, similar to UOB, reached the size it is today not merely via organic growth, but following a string of mergers and acquisitions. UOB, for example, took over Chung Khiaw Bank in 1971, Lee Wah Bank in 1973 and most famously, Overseas Union Bank in 2001.
UOB Kay Hian, on the other hand, was originally UOB Securities and Kay Hian Holdings.
They merged in 2000, and, over the next 18 months, amid a backdrop in the liberalisation of trading commissions, went on an acquisition spree, taking into its fold the retail brokerage businesses of Credit Suisse First Boston, RHB-Cathay Securities, OUB/Grand Orient, Millennium Securities, JM Sassoon, and World Securities (HK). There were further acquisitions made in regional markets such as Thailand and Malaysia, such as the 2012 acquisition of Innosabah and AA Anthony Securities.
The most recent expansion took place late last year. UOB Kay Hian took over 105 remisiers from DBS Vickers after DBS chose to stop having remisiers serving retail clients, reorganising this market segment into its overall personal banking and wealth management business instead. UOB Kay Hian now has a total of 920 trading representatives and remisiers in Singapore, and double that number across the entire regional network.
The way Choo described it, the move was a complex logistical undertaking. These remisiers brought with them around 170,000 accounts opened by 120,000 clients. Each account holder had to be properly notified with two letters. That meant 340,000 letters, each of which cost more than a dollar to write, print and mail.
In addition, there was the backend data including balances, custody holdings and so on, that had to be ported over. Fees and costs were incurred and had to be paid to the Central Depository and the tech vendors. Then, as a gesture of goodwill, UOB Kay Hian gave each of the remisiers a small hongpao for the “inconvenience”. All in, the whole exercise cost the brokerage a couple of millions of dollars.
When the remisiers change to another brokerage, they typically have to resign and re-apply to the new one, which means a month of downtime. But DBS and UOB Kay Hian were able to work out an instantaneous transfer.
The move — accounts, database, and physical relocation — took place over the long Deepavali weekend last October. The remisiers ended trading on Friday, and when the market reopened on Tuesday, they were ready to be back in action. “There was very little interruption, and I think that was good enough,” says Choo.
Thus far, Choo is very happy with his new colleagues. “They’ve been a fabulous bunch, very disciplined, very professional, very compliant. They trade for good clients — not the speculative types — very fundamentally based.”
By the time the DBS remisiers fully settled in, there was barely a month or so to go before the end of the last financial year.
This means their contribution to UOB Kay Hian’s FY2019 earnings was not yet meaningful, but will kick in this current year. For the year ended Dec 31, 2019, the company reported total income of $380.6 million, down 0.4% y-o-y. However, earnings in the same period was down 7.5% y-o-y to $69.2 million, as it incurred higher financing expenses because of a greater volume of structured lending activities.
In Choo’s words, 2019 was a “very tough year”, no thanks to the US-China trade war that dogged investors’ mood and appetite for more than a year. Yet, it was a rather different story for the first two months of this year, as volume increased not merely in Singapore but across the region. The momentum at the start of the year can be attributed to the Phase One settlement between the US and China. “The market was primed to go. We had 20 months of very slow conditions, and there’s a build-up of cash, and a strong flow of liquidity back to the market,” explains Choo.
Next, before the correction triggered by the Covid-19 outbreak, the US market was charging ahead strongly in January and February. However, Choo isn’t seeing a significant drop in trading interest because of Covid-19.
“It is not dichotomous with the market,” he explains. “Many of our clients today trade the US, 30–40% of them. They are trading the US like crazy; our backroom is very, very busy at night,” quips Choo.
Due to the Covid-19 outbreak, there are certain specific sectors such as hospitality and transport, which depend on crowds, that are being hit badly. Yet, Choo is upbeat that the IPO pipeline this year will continue to do well, despite the current volatility caused by the Covid-19 outbreak. “I think we are seeing some very interesting ideas, extremely interesting deals.”