January 19, 2014

SM group prepares for ASEAN integration

The Philippine Star today quoted the vice chairman of SM Investments Corp. (SM) as saying the group is gearing up for the upcoming ASEAN regional integration. While the group believes that its mall and property businesses are already competitive given their dominant market positions, it is scaling up its banking operations to take advantage of the potential customer base expansion. The group expects that the regional integration will allow it to tap 600m consumers and facilitate the free flow of goods, services, labor and investments in 2015. SM owns 40.9% of BDO Unibank (BDO, Buy) and 17.2% of China Banking Corp. (CHIB).

Our Take: While SM's local banking units already have an established presence in the country, they are significantly smaller than their ASEAN counterparts. To take advantage of the integration, BDO and CHIB may start exploring partnerships with other banks or institutions in the region. This will facilitate the buildup of their presence in other ASEAN countries and allow them to understand these markets better. – WealthSec