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New Malaysian investment bank mooted
John Burton
1/23/2006
The suspension of trading in shares of Avenue Capital and ECM Libra triggered expectations that the two will merge to form one of Malaysia's biggest investment banks.
The Malaysian government is pushing to create bigger local investment banks ahead of opening the financial market to foreign competition by 2008.
The anticipated move to combine the financial services groups Avenue and ECM Libra would create a rival for CIMB, Malaysia's biggest investment bank. Avenue is controlled by the finance ministry, which would be the biggest shareholder in any merger of the two. Avenue's main businesses are stockbroking and asset management.
ECM Libra has focused on corporate advisory services, including arranging initial public offerings.
The merger of the two companies would make them eligible for investment bank status since their combined share capital is expected to be at least M$600m (US$160m), above the M$500m threshold set by the central bank. The potential rivalry between CIMB and Avenue/ECM Libra would pit two state-owned investment banks with good political connections.
CIMB is part of state-owned Bumiputra Commerce Holdings and headed by Nazir Razak, the brother of Malaysia's deputy prime minister.
ECM Libra's shareholders include Khairy Jamaluddin, the prime minister's son-in-law.
The central bank last year set guidelines for encouraging the creation of investment banks by saying that stockbrokers would gain investment bank status by merging with either a merchant bank or discount houses.
Under syndication arrangement with FE
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