FIN346 Chapter 4 PDF: Operations and Services of Investment Banks

PREPARED BY: SUHAILY MAIZAN ABDUL MANAF › Development of investment banks in Malaysia › Services of Investment bank  Equity broking: individual investing and institutional investing  Advisory in merger and acquisition  Underwriting  Fund raising: debt market vs equity market  Research...

PREPARED BY: SUHAILY MAIZAN ABDUL MANAF › Development of investment banks in Malaysia › Services of Investment bank  Equity broking: individual investing and institutional investing  Advisory in merger and acquisition  Underwriting  Fund raising: debt market vs equity market  Research 2  Investment bank is a financial intermediary that specialize in large and complex financial transactions such as underwriting.  An intermediary between a securities issuer and the investing public  facilitating mergers and other corporate reorganizations  acting as a broker financial adviser for institutional clients. 3 1. Investment banks are 4. The new structure required established in Malaysia on the merchant banks, stock- March 2005. (Bank Negara broking companies and Malaysia, 2005) universal brokers to be 2. It is introduced by Bank transformed into investment Negara Malaysia (BNM) with banks latest by first quarter of the purpose to strengthen 2007. the finance sector 5. In other words, it is the 3. It is licensed to perform merger of merchant banks, investment banking functions stockbroking companies and by Securities Commission and discounts houses to become BNM investment bank. 6. As a point of reference, the conventional role of discount houses can be described as keepers of liquidity for the banking system. 4  Maybank Affin CIMB Hong Kenanga Investment Investment Investment Leong Investment Banking Bank Bank Investment Bank Berhad Bank 5 Investment Banks Last Updated Date : N Name Ownership o. 1 Affin Hwang Investment Bank Berhad L 2 Alliance Investment Bank Berhad L 3 AmInvestment Bank Berhad L 4 CIMB Investment Bank Berhad L 5 Hong Leong Investment Bank Berhad L 6 KAF Investment Bank Berhad L 7 Kenanga Investment Bank Berhad L 8 MIDF Amanah Investment Bank Berhad L 9 Maybank Investment Bank Berhad L 10 Public Investment Bank Berhad L 11 RHB Investment Bank Berhad L 6  Equity Broking Investment Research Advisory Bank Fund Raising 7  The Equity Capital Markets department manages the investment banks activities in the primary and secondary equity, and equity-linked markets. 8 Placement and Trading of stocks and shares Arranging, structuring, and underwriting of stocks and shares Advising on investment activities Share margin financing Next page… 9 Market research and performance analysis Opening/updating/closing of CDS accounts Authorised Deposit/withdrawal and transfer of Depository Agent CDS shares CDS settlement and reconciliation (ADA) of shares CDS corporate action exercises CDS balance enquiries Collateralised Custody and trading accounts nominee Share margin trading accounts services Custodian accounts 10  Investment Banks also provide the advisory services to its clients in such aspects, include Mergers and Acquisitions (M&A), Underwriting, Restructuring and Reorganization, and Strategic Advisory. 11  Advising and preparing companies for floatation on the stock exchanges. 1. Identifying potential merger partners and take-over targets for clients and advising on mergers and acquisitions and take-over transactions. 2. Devising and executing strategies for capital raising activities through placement of securities, secondary issues of securities, special issues, 3. convertible loans, and other capital market instruments. Providing advice from corporate restructuring exercises to restructure a company’s gearing or business operations. 4. Offering independent evaluation of corporate transactions and valuation of companies/business/securities and assets. 5. 12  The Debt Capital Markets department provides the investment banks corporate clients with the expertise in structuring debt financing programs via debt securities instruments, conventional or Islamic. 13  Advising and arranging for the issuance of debt securities. 1. Arranging or providing “Bridging Loans” pending the issuance of 2. debt securities. Underwriting the issuance of debt securities. 3. Subscribing the issuance of debt securities. 4. Placement of debt securities (through fixed income). 5. Agency role throughout the tenure of the debt securities. 6. 14  The Investment Banks also offer research activity to its clients as to disseminate them with informed views and actionable ideas on economic indicators, markets and companies in Malaysia on a daily basis.  The views and recommendations are distributed in the form of research reports to fund managers and form an objective assessment of the investment climate and opportunities in the Malaysian equity market. 15  Example of research  Research analysts reports: follow stocks and › Malaysian Equity bonds and make Strategy, recommendations › MIDF Equity Beat, on whether to buy, and sell, or hold those › MIDF Economics securities. 16 17