HVB Capital Asia Ltd., the securities arm of HypoVereinsbank in Tokyo, is considering establishing an equity derivatives desk by early next year. Mike Nagata, head of trading in Tokyo, said that as a securities firm, equity derivatives is a product it needs to offer. He added that as the government pushes through reforms Japanese firms will look to unwind cross-equity holdings via the use of derivatives.
Meanwhile HVB is primarily focused on building up its fixed-income desk this year, especially for credit derivatives, Nagata explained. The firm is looking to hire additional credit derivatives traders.
An equity derivatives dealer in Tokyo was skeptical about the chances for success of a new entrant in the competitive Japanese market. The local market, he noted, has been suffering as Japanese banks and corporates delay hedging plans in anticipation of government relief and Japanese retail clients lose their appetite for equity-linked products. He added that HVB would be "last to a dead party". Even if the market were to pick up, there are already enough established players to handle additional business, he continued.
"At the end of the day, not everyone wants to deal with the Goldman [Sachs] and Merrill [Lynch]'s of the world," rebuked Nagata. He added that HVB has a large balance sheet and the know-how from the European market and, despite being a later comer in the Japanese equity market, would still be able to find opportunities.
