HSBC is preparing to launch a structured credit derivatives operation in Tokyo next month as part of a major push into the market. "This year we will be a completely different firm in Japan," said Kenichi Tatsuzawa, managing director and head of global fixed income sales in Tokyo. The buildup follows aggressive expansion efforts in Europe, the U.S. and China. Rivals said the group's growing private bank in Japan could be a key distribution channel for structured credit investment products.
The firm will bring aboard a couple of credit structurers next month to establish a desk, which will handle such products as credit-linked notes and first-to-default baskets, though Tatsuzawa said it was too early to disclose the names of the staff. CDS trading on Japanese names will continue to be handled out of New York and London, which cover the market at all hours.
Tatsuzawa joined at the onset of the year to bulk up the firm's debt business, which has undergone a wave of hires on the sales side in recent months. He was previously head of global markets for Bank of America in Tokyo (DW, 9/25/02) and before that worked at Merrill Lynch. Since his departure from BofA in 2002, he set up a golf academy and a spa on Australia's Gold Coast.
Tatsuzawa said HSBC's global expansion efforts are now focused on Japan. "The only area not fully paid attention to was Tokyo--now it's time to really get into this market and capture a bigger share of the pie," he added. The firm is injecting more capital into the Tokyo branch and will begin Japanese government bond trading in the next month or two. He explained that by facilitating JGB trading, which accounts for the vast majority of fixed income portfolio positions in domestic accounts, the bank will find it easier to sell more value-added products such as interest rate and credit derivatives when it is a full market-maker in yen products.
Market officials said HSBC should be able to carve out a decent niche in Japan's saturated credit derivatives market, which has faced tight spreads and heated competition from both international and domestic houses, if it can fully take advantage of its growing private banking operation in Japan and distribute in-house credit products. Other entrants in the Japanese structured credit market in recent years include Royal Bank of Scotland (DW, 5/27/02), Aozora Bank (DW, 3/24/03) and IXIS Corporate & Investment Bank (DW, 8/27).
