Samsung Securities yesterday confirmed that it is significantly reducing its presence in Hong Kong and will shift the focus of its international business towards Korean equities. The number of employees in Hong Kong will be cut by more than half from about 100 at present, it said.
“As a result of the challenging market environment we are currently facing, we have had to make the difficult decision to reduce the headcount in our Hong Kong operation and re-align our business to ensure that we remain focused on where we can best achieve the strongest financial performance,” the Korean brokerage firm said.
However, the statement tried to tone down numerous media reports, including an article by FinanceAsia yesterday, which quoted sources saying it is pulling the plug on its Asian expansion.
“Samsung Securities’ overall commitment to its long-term strategy in Asia remains unchanged,” it said — a line that must be a bit puzzling for the employees who were told at an internal meeting on Tuesday that they no longer have a job and that the business they have helped to build during the past couple of years will basically cease to exist.
A Samsung Securities spokesman based in Korea even argued that the Hong Kong equity sales and research business is being shut down “temporarily” because of reduced earnings expectations. “We could re-enter the business when the market is booming. It is our mid- to long-term goal to be a prominent regional player in Asia,” he said, while at the same time acknowledging that the firm won’t keep any of its Hong Kong analysts or sales people.
Somehow that doesn’t sound like the most efficient use of the funds that the firm has invested in building an Asian business since August 2009 and one has to wonder how much luck it would have in hiring people should it decide to re-launch its Asian expansion plans later on.
According to sources that attended the internal meeting, the firm will shut down almost all of its international operations, except for the part of the business that is providing brokerage of Korean equities for international investors. The closures, they said, will include capital markets and corporate finance, as well as the divisions focusing on the sale and research of Asian equities.
The spokesman said yesterday that Samsung will continue to operate its investment banking division in Hong Kong, although “a small number of layoffs ... could happen”. The focus of the division, he said, would be to find business opportunities in niche deals such as IPOs of small and mid-sized Korean companies.
While that may technically be true, sources said that the firm is basically keeping only a few selected sector specialists and it won’t have any ECM team. Also, even if Samsung was to potentially find a role for itself on Korean companies listing outside of Korea, that isn’t exactly big business.
At the moment it appears the final number of layoffs is still a moving target, and it is unclear how many people will be retained to sell Korean equities. One source noted that the headcount of less than 50 people that will remain in Hong Kong after the cutbacks announced yesterday does include backoffice and other support staff. And while the company said that the move will only affect its Hong Kong and China operations, it is likely to result in a reduction in the number of sales people in other overseas offices like Tokyo, London and New York as well. In New York, for example, four out of the six sales people have been let go.
The majority of the layoffs will be in research — a department that the firm has been aggressively expanding during the past couple of years under the leadership of Asian CEO Sung June Hwang, who joined Samsung in August 2010 to drive the international expansion. By February last year, Samsung had more than 40 analysts in Hong Kong focusing primarily on the research of Hong Kong and China stocks.
And one thing is quite clear. Even if Samsung insists on referring to this as a realignment of its business, there will be a lot of people thrown out on the street looking for new jobs at a time when virtually no-one is hiring.
