NH Investment & Securities is a traditional powerhouse in the debt capital market (DCM) alongside KB Securities. Having narrowly missed first place last year, NH Investment & Securities is tightening its reins this year with aggressive sales strategies. It is currently leading the pack at the beginning of the year by underwriting SK hynix's 87 billion won corporate bond and SK geocentric's 210 billion won corporate bond issuance.
The Industry 3 division, in charge of DCM, is led by Deputy Minister Wang Tae-sik. After the appointment of CEO Yoon Byung-woon last year, Wang was promoted to executive director during the first personnel changes. He is evaluated as having expertise in investment banking operations and corporate advisory. Previously, he managed fundraising for small and medium-sized enterprises (SMEs) as the head of the newly established SME division in 2022, overseeing capital raising for Eco&Dream and Oscotec's paid-in capital increase.
On the 19th of last month, I met with Deputy Minister Wang, who returned to DCM operations at the NH Investment & Securities headquarters in Yeouido, Yeongdeungpo-gu, Seoul. Below is a Q&A with Deputy Minister Wang.
What is the secret to maintaining your lead at the start of the year?
"Last year, I regrettably missed first place at the last minute. Because of that, we conducted a lot of cause analysis this year. To successfully oversee corporate bonds at the beginning of the year, we need to start sales from the end of the previous year. Therefore, we took note of each company's repayment information in advance and checked how much they planned to issue at the start of the year. It seems we were faster in gathering that information and conducted a more thorough inspection, which ultimately resulted in not missing any deals this year."
The corporate bond market is more active this year than in previous years.
"It has definitely increased compared to the beginning of last year. The issuance size has grown, and companies have increased. The reason is clear. Until last year, interest rates were high, so companies tried to reduce the amount raised as much as possible due to interest burdens. However, thanks to expectations of interest rate cuts this year, market interest rates have significantly decreased. Compared to last year and the year before, the cost of financing has definitely lowered, so companies are naturally trying to issue more than in previous years and increasing the amounts as well."
Are there any noticeable changes or difficulties?
"There are definitely challenges with bonds that are not selling. After returning to the corporate bond market after a long time, the preferences and aversions of investors toward sectors have intensified. For instance, sectors like chemicals, which are not performing well, used to see some demand based on specific company factors, but nowadays there is no interest at all. In fact, companies that are struggling more need external capital injections, but in most cases, demand is hardly confirmed."
There is a lot of overlap with MERITZ Securities, which is strengthening traditional investment banking. Some personnel have moved over, and they have also handled NH Investment & Securities' corporate bond issuance.
"That's right. MERITZ Securities recruited former President Jeong Young-chae and former syndication head Song Chang-ha from NH Investment & Securities. In January, after establishing a corporate finance division, they took on their first deal, overseeing the issuance of 500 billion won worth of NH Investment & Securities corporate bonds. There are claims that this is due to personnel movement, but that is not the case."
The bond sales team at MERITZ Securities originally has a strong insurance network. NH Investment & Securities planned to issue a 310 billion won 3-year bond and a 190 billion won 5-year bond. Unlike the highly sought-after 2 and 3-year bonds, most of the 5-year bonds are taken by insurance companies. Since a lot of 5-year bonds were issued this time, we selected a house that excels in sales to insurance companies as the lead underwriter, and one of them was MERITZ Securities.
Do you have a memorable deal?
"There are about two notable ones. First, while I was the head of the SME division, in September 2023, we created the industry's first online subscription system for public buyouts. Having an online system improves accessibility for small shareholders, also increasing the likelihood of successful public buyouts. In 2023, we oversaw 7 out of 17 public buyouts, and in the next year, we handled 12 out of 21 cases. This success is thanks to the 'package deal' strategy that integrates public buyouts, acquisition financing, and advisory services that President Yoon has emphasized."
In this regard, last year, the issuance of exchange bonds by HD Hyundai was overseen by NH Investment & Securities, while NH Hedge Asset Management participated as a limited partner. The Wealth Management (WM) division sold part of this private equity fund through special sales at the center. I find it memorable because we created a structure that allows for collaboration with affiliates.
How do you forecast the corporate bond market this year?
"The general perspective is that interest rates will be lower than they are now, so investment demand is expected to be decent. Given that our country's economic growth rate is currently poor, it's difficult to maintain high interest rates in this situation. Theoretically, interest rates must be lowered when the economy is bad. However, as previously mentioned, investment demand will likely vary for different corporations."
Do you expect fierce competition over commissions like last year?
"This year, it seems it won't be as intense as last year. Of course, if it is a deal that must be undertaken and there are commission evaluation items, securities firms may have the possibility of lowering commissions to gain points. When we undertook the Housing and Urban Guarantee Corporation (HUG) REIT last year, HUG presented items such as price evaluation (underwriting fee). However, such cases are rare."
Please give advice to bond ants (individual investors).
"Generally, individual investors often focus on interest rates when investing in bonds, but investing solely in high-interest bonds is a risky move. High interest rates imply that the credit rating is lower or there are issues with performance. Especially lately, young investors have been buying bonds directly through applications without going through securities company staff. Therefore, I recommend reading research materials or reports about the issuing company before investing."