SPACs in Malaysia

Malaysia’s burgeoning economy and booming capital markets have paved the way for all manner of new investment instruments and schemes, not least of these being special-purpose acquisition companies (SPACs), which have come to play a vital part in the country’s increasingly complex investment landscape.

A SPAC is a collective investment scheme that allows investors on public stock markets to invest in private equity-type transactions, in particular leveraged buy-outs

A SPAC is a collective investment scheme that allows investors on public stock markets to invest in private equity-type transactions, in particular leveraged buy-outs. As for the SPACs themselves, they are essentially shell companies without any actual operations, although they do go public with the aim of merging with or acquiring a company –with the merger or acquisition paid-for with the proceeds of the initial public offering.

SPACs were first made popular among investors in the US towards the beginning of the twentieth century, but later lost ground, save for South Korea’s brief flirtation with the scheme in 2010. The rise of SPACs in Malaysia, however, is more of a recent phenomenon and today there is an increasing consensus that Malaysia may well be on the verge of becoming a major arena for SPACs.

SPACs are registered offerings and are regulated by certain US Securities and Exchange Commission (SEC) rules, lending them a far greater degree of transparency to that of private equity. The applicable SEC regulations require, among other things, that SPACs file financial statements and fully disclose any material likely to affect the company. Moreover, because SPACs are publicly traded, they provide liquidity to investors, in that investment in the SPAC comes in the form of common shares and warrants.

In addition, the Malaysian Securities Commission (MSC) has issued new prospective guidance pertaining to the listing of SPACs, which is designed to ensure that new submissions of SPACs in Malaysia are of a high quality and with public investors’ protection in mind.

Unsurprisingly to those who have watched the firm’s recent progress, Hong Leong Investment Bank (HLIB) has spearheaded advances in the field of SPACs in Malaysia. The firm is quickly emerging as a pioneer in SPACs in Malaysia – being the first-to-market in this new field – and shows an understanding of recent developments in Malaysian capital markets, having so far successfully listed two out of the three existing SPACs.

Developments in Malaysian capital markets

In the latter stages of the 20th century Malaysia enjoyed something of an economic boom and is today the world’s largest Islamic banking and financial centre due to new developments in Malaysian capital markets. As of 2012, the Malaysian economy was the third largest in South East Asia, eclipsed only by its more populous neighbours Indonesia and Thailand, and its fortunes from hereon look likely to remain essentially unchanged for quite some time.

Owing principally to strong domestic demand, Malaysia’s economy grew by a remarkable 5.6 percent in 2012, a rate that exceeded the five percent forecast by analysts, and last year expanded a further 4.7 percent. What’s more, the outlook for the year ahead is similarly positive, with analysts expecting some five percent growth.

Naturally, Malaysia’s overall economic success has had an energising effect on the nation’s capital markets, as investors both inside Malaysia and beyond its borders look to partake in the country’s success. Between 2012 and 2013, Malaysian capital markets have increased in size by approximately 20 percent and are currently running at a capacity of some $150bn.

In recent years, capital markets have raised the country’s economic standing and will likely continue to do so provided the industry continues to weather the many international financial and economic fluctuations, as it has done these previous five years.

The Malaysian Securities Commission’s annual report in 2012 testified to the fact that new developments in Malaysia’s capital markets had increased over the previous year by 16.4 percent, indicating that they are not only growing, but that the growth rate is on the rise.

HLIB and Malaysia’s investment banking industry

Naturally, new developments in Malaysian capital markets have created a highly competitive investment banking industry in which banks are vying for a greater quality of service and attempting to keep pace with Malaysia’s burgeoning markets. Competition is quite understandably vigorous, and while carried out with the courtesy and respect inherent to Malaysia’s culture, no bank is going to miss out on a chance to outscore or outperform another where it can legitimately do so.

Today, the bank has more than 300 branches, sales and business centres in Malaysia, Singapore, Hong Kong
and Vietnam

Hong Leong Bank, a publicly listed company on Bursa Malaysia, is a member of the Hong Leong Group Malaysia, which first established operations in 1905 in Kuching, Sarawak, Malaysia. In 2011 Hong Leong Bank completed a merger with EON Bank Group, in effect transforming the singular entity into a banking group with in excess of RM145bn in assets and an expanded network of 329 branches nationwide. Today, the bank has more than 300 branches, sales and business centres in Malaysia, Singapore, Hong Kong and Vietnam and exhibits the utmost competency when dealing with new developments in Malaysian capital markets.

Kuching, Malaysia, the city where Hong Leong Group first began operations in 1905

HLIB represents the investment banking wing of Hong Leong Financial Group Malaysia, and, despite being a relatively new bank, has demonstrated strong and steady growth over the past four years; its turnover has increased to RM182.2m in 2013, far above and beyond that of RM24m in 2009.

What’s more, HLIB is clear on its ambitions for the future and quite simply seeks to become the leading provider in Malaysia of investment banking services. Above all, HLIB is committed to bringing the highest level of innovation across its products and financial solutions, and its highly capable staff and senior management alike are profoundly devoted to the pursuit of excellence and strive to deliver the very highest level of customer service.

Winning clients and client confidence

HLIB abides by a powerful two-pronged approach to excellence and consistently high customer service quality, via its organisation and its people, and to some degree, should be considered successful for the simple reason that HLIB seeks to hire, train and retain those who delight in bringing the highest levels of service to customers.

HLIB strives at all times to offer employees the opportunity to excel in all they do, and the bank doesn’t just aim to recruit and nurture people with the ability to carry out the necessary technical skills in banking and finance, but also focuses on finding people who crave challenge, innovation and success.

The bank has established an outstanding record for winning market share by responding to changing market conditions in a timely manner, offering structured financial products and solutions, and considering the cyclical nature of the bank’s markets in formulating, deploying and reviewing its business strategies.

Representative of the bank’s client focus is its Investment Banking Division (IBD), which has several client relationship teams focused on customer contact, deal origination, and supporting the products group (Debt Markets and Equity Markets), each headed by leaders boasting over 10 years of product-relevant experience.

All-in-all, HLIB’s structure is designed to facilitate the provision of wide ranging product offerings and to promote cross-selling efficiencies through the bank’s centralised marketing team, who each serve as champions of an outstanding client relationship.

Taking these factors into consideration, HLIB is able to deliver customer service in a number of ways: firstly, by applying in-depth knowledge of clients and designing innovative and value added financial solutions to not only meet but exceed client expectations; secondly, by demonstrating sincerity in helping clients manage their assets effectively in order to secure their stated objectives; and thirdly, by maintaining a customer-centric culture at all times and addressing client needs holistically, including their non-commercially driven requests.

The future of SPACs in Malaysia

HLIB is highly adept at recognising and assessing new developments in Malaysian capital markets, allowing the bank to react and seize market leadership in structured financial solutions and meet clients’ very specific needs. One example here is the issuance of the first Tier-2 capital instruments by an insurance company, at a time when such issuances were dominated by banking institutions, and another being the successful completion of SPACs in Malaysia.

It is this heartfelt commitment to clients that differentiates HLIB from competitors in the industry

According to the bank, many of the most significant new developments in Malaysian capital markets of late have been due to increasing regulation, M&A numbers among large players, volatility and tougher competition. Nonetheless, HLIB is taking these developments in its stride and looks assured to continue on with impressive growth.

“The increases in mergers between the largest Malaysian investment banks has become a positive advantage for us, because many of the largest banks that are our competitors are actually distracted by the mergers and by the resulting commercial imperatives such as their need to integrate two cultures into one,” said LeeJim Leng, Chief Executive Officer, HLIB.

“While they are preoccupied with these concerns, we at HLIB can gain market share and push forward our own commercial and professional objectives, which are based around bringing the very highest standards of financial and business expertise to the attention of our clients.”

It is this heartfelt commitment to clients that differentiates HLIB from competitors in the industry. HLIB’s work not only features the highest levels of professional skill and innovation, both at a technological and operational level, but above all else HLIB’s staff work to take the bank forward in its objective to become one of the leading players in Malaysia’s financial services industry. Without this commitment to clients and a sincere interest in discovering what it is they need in terms of products and services, HLIB would not be where it is today.

“We seek above all to be familiar with our clients’ needs and to work closely with our clients to ensure that we continue to know what their needs are and can meet those needs,” said Lee.

Video

HLIB CEO Lee Jem Leng, CRO Lee Wai Sing and Head of Treasury Cheah King Fui spoke to World Finance recently about the challenges, opportunities and trends in Malaysia’s capital markets.

For a full transcript of this video, please click here.