Leveraging on each otherÆs strengths, the new company, provisionally called Merrill Lynch HSBC, will aim its services at consumers who prefer to make their own decisions about where to invest.áCustomers will have a deposit account with Merrill Lynch HSBC through which they will be able to invest in various products, including stocks, bonds, mutual funds, unit trusts, and locally tax-efficient products. Customers will also earn interest on the same account and be able to access it via cheques, charge cards, wire transfers or ATMs.
But bank analysts arenÆt so optimistic about the joint venture. Haydn Meadows of BNP-Prime Peregrine warns that it could be a risky move for HSBC, considering that the new company will not operate in the US.
ôMore HSBC customers will be made available to Merrill Lynch, but not vice versa,ö he says.
Morgan StanleyÆs Amit Rajpal concurs: ôTheájoint venture is an internationalization of Merrill Lynch.á HSBC must be disappointed that it was blocked from the US market.ö
This must be especially so,áconsidering the statistics. Forrester research estimates that 9.7 million US households will manage more than $3 trillion in 20.4 million online accounts by 2003.
Amit expects that the new company willápoach some of HSBCÆs existing customers.
ôSome cannibalization can be expected to take place in the UK and Hong Kong. In both places, HSBC has a strong presence, and in the UK, the newájoint venture will be competing against Midland and First Direct, both part of HSBC.ö
But the news is not all bad for HSBC. New markets should open up in Germany and Japan, especially Japan where there is not a strong equity culture, and direct investment more popular. In addition, the Merrill Lynch HSBC joint venture is hoping to bring on board an emerging category of consumers who "prefer to make informed investment decisions for themselvesö - the young, net-savvy and relatively affluent.
