Drive to Create Korean Goldman Leads to First Offshore Bond

(Bloomberg) -- Mirae Asset Daewoo Co. is planning what would be the first-ever offshore bond by a South Korean brokerage amid a push by authorities to make local securities firms more competitive on the international stage.

Korea’s biggest brokerage by assets is meeting investors in Asia and Europe this week for the debt sale, according to a person familiar with the matter. It’s becoming more active overseas, taking part in a $150 million bridge loan to a Las Vegas resort recently and investing $300 million in April to fund a group’s purchase of a Hong Kong skyscraper owned by Li Ka-shing.

The Korean government started saying in the early 2010’s that it wants to create what it calls a “Goldman Sachs of Korea,” and it’s encouraging brokerages to expand their global clout, as a crowded securities industry at home weighs on profits. Those efforts have led to rapid growth among the largest brokerages, helping spark a 52.1 percent increase in the sector’s combined assets in the past five years to 411 trillion won ($362 billion), a faster pace of gains than the banking and insurance industries.

“Given the very high level of competition in the domestic market, Korean securities firms are interested in expanding overseas, which would lead to demand for offshore funding,” said Tae Jong Ok, a financial institutions analyst at Moody’s Investors Service. “Mirae Asset is the most advanced in overseas expansion among Korean securities firms.”

Mirae Asset Daewoo needs foreign-currency financing for investment as its overseas business grows, according to a company spokesman.

Its rising investments include the bridge loan it provided with Korea’s NH Investment & Securities Co. to the resort and casino called The Drew Las Vegas. Mirae also agreed to jointly buy a London office from Blackstone Group LP in March with NH Investment.

Expanding overseas increases Mirae’s operational risks as it does more business in unfamiliar markets with different regulations and compliance requirements, said Ok at Moody’s. But diversifying its assets and earnings across different markets and lowering its dependence on Korea is a positive factor, he said.

Another of the biggest brokerages from the country, Korea Investment & Securities Co., is moving to expand in Hong Kong. It said on Friday that it will inject $400 million into a Hong Kong unit to do so.

By expanding overseas, Korean brokerages may also be able to help domestic investors and companies invest abroad, Moody’s Ok said.

Korean companies in other industries have found strong demand for their offshore debt as investors look for high-grade bonds amid emerging-market jitters, and as military tensions with North Korea fade.

Kookmin Bank and Doosan Power Systems SA are among firms that sold dollar debt recently, helping push up offshore bond sales by Korean issuers including the government to $30 billion so far this year, the most for the period since 2012, according to Bloomberg-compiled data.

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