Citigroup eyes top 3 foreign broking spots

The stockbroking firm will target foreign institutional investors who want to invest in Malaysia as well as domestic institutions wishing to invest overseas


CITIGROUP Inc, the world's largest bank, officially entered Malaysia's stockbroking sector yesterday and said it aims to become one of the top three foreign brokerages in the country in two years.

"It's going to take time for us to build relationships with the institutions, to build the trust ... Nevertheless, we have a challenging and ambitious goal, and we are confident that we can achieve it," Citi Asia-Pacific head of equities Adrian Faure said.

Citigroup, via Citigroup Global Markets Malaysia Sdn Bhd, received Bank Negara Malaysia's approval to establish a stockbroking company in the country early this year. It now joins six other foreign players in the sector.

For Citigroup, having the stockbroking licence marks a significant milestone as it can now play a wider role in the Malaysian capital market.

"It fills in the one gap we have in our product offering," said Sanjeev Nanavati, chief executive officer of Citibank Bhd and chairman and non-executive director of Citigroup Global Markets Malaysia.

The stockbroking firm will target foreign institutional investors who want to invest in Malaysia as well as domestic institutions wishing to invest overseas. A bulk of foreign interest is expected to come from the Middle East.

"Middle East funds are increasingly looking to invest in Malaysia. With a presence across that region with a team that covers more than 100 clients with assets under management of more than US$1 trillion (RM3.1 trillion), Citi is well placed to help facilitate some of these increased flows," said Sanjeev.

Citigroup's stockbroking business in Malaysia is also expected to help address the declining foreign participation in the local stock exchange.

As of the first half of this year, foreign investors own just 25 per cent of the market here against 35 per cent between 2005 and 2007.

The launch is also timely as there is an increasing emphasis on investing in Southeast Asian countries.

"Hong Kong and (mainland) China have had a tough year and we see rotation into the smaller markets," Faure said.

However, Faure warned that there was a risk of overheating in the market.

"Everyone now has got a religion, and that religion is emerging markets. And I see every day new funds coming into Asia.

"So the risk here is too much money, too much liquidity-chasing, where valuation becomes extreme. That being said, we don't see that being the case.

"The Asian markets, typically through the cycle, will trade in a valuation of around 1.3-3 times price to book, from the peak to the trot, and we are currently trading at about 1.6-1.7 times," he said.

Citigroup also expressed hopes of expanding its stockbroking presence to Vietnam by the end of this year. It may acquire a minority stake in a stockbroking firm in Vietnam.

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