George Wang's rescue of BBY part of 'bridge to Asia'

Tony Boyd  |  AFR  | 3 Jun 2015

The purchase by George Wang of failed stockbroking firm BBY is the logical extension of his 20 year strategy to build a financial services business closely tied to capital flows from China.

Wang is a very patient man. He is willing to make a long-term commitment to BBY and rebuild its position in the market.

His patience is shown by his eight-year time horizon for breaking even on his investment in the Asia Pacific Stock Exchange (APX)

APX was meant to be the "bridge to Asia" for Australian investors wanting to buy shares directly in Chinese companies on a trading platform based in Australia.

After six years of operations APX loses money and only two Chinese companies have listed on the exchange. 

The fundamental problem with Wang's APX is that it is an offer-only market. In other words, there are only sellers on the exchange and no buyers. 

That has created a difficult situation for anyone who bought shares in the two companies listed on the exchange. What's worse, one of the companies, Zhonghuanyun Holdings Group, missed its prospectus profit forecast by 95 per cent.

However, it should be noted that in keeping with every aspect of his business, Wang has employed experts in their fields. APX is chaired by former securities regulator Ray Schoer and its board includes former Merrill Lynch Asia Pacific chairman Greg Bundy. The chief operating officer of APX is former ASX senior executive David Lawrence.

Other talented people working within the AIMS Financial Group include Brett Spork, who used to run E*Trade Australia, former ASX and Pershing Securities executive Adam Joseph and former corporate finance executive from CIMB and RBS, Mike Netterfield.

Spork has been seconded to BBY to assist the new chief executive Craig Mason, who joined the firm from Pershing Securities, where he was non-executive chairman. Before Pershing, Mason was country head of BNY Mellon Australia.

Mason was not giving much away about the future strategy of BBY on Wednesday except to say that there will be no repeat of the mistakes made under former management led by Glenn Rosewall.

It is now common knowledge that Rosewall took on too many responsibilities, did not delegate important issues to senior staff, failed to understand the risks inherent in the options trading business and allowed the firm to function with inadequate accounting systems.

Mason says the firm will offer a broad array of products. But it will not allow its risk management to be dictated by the products that generate the most commission for dealers.

Wang's broking business, AIMS Securities, has changed its name to BBY Asia Pacific. That allowed the firm to hit the ground running yesterday with its own Australian Financial Services Licence.

BBY issued its first research note under Wang's ownership with the release of a speculative buy on Geopacific Resources.

The BBY acquisition provides the opportunity for Wang to build on the successful broking/investment banking model that has worked well at other firms.

This involves putting the corporate finance division at the heart of the firm. The corporate financiers take the lead in finding undervalued companies with high growth trajectories.

These companies make ideal clients because they need capital to grow and this is supplied by capital raisings through the firm.

The research department remains independent of the corporate finance arm but it plays an important role in identifying the high growth companies at the core of the strategy.

Wang is brimming with optimism about the opportunities for Australia to sell financial services in China. 

He recently took 100 financial advisers to Shanghai for a conference and was shocked to find that half of them had never been to China.

He believes Australian business is missing opportunities in China simply due to ignorance. 

His long-term vision for AIMS Financial Group is for it to be a conduit for Chinese capital flows into Australia as well as a key adviser for Australians seeking advice on how to invest in China's high-growth companies.

It was with that vision in mind, that Wang this month signed a memorandum of understanding with the China Beijing Equity Exchange to promote the idea of Chinese companies listing on the APX.

AIMS Financial Group has three offices in China and Wang hopes to open a BBY office in Shanghai.

Wang's optimism is evident from his claim that there are about 30 Chinese companies in the pipeline for listing on the APX.  

His expansion in Asia and his investment in a stock exchange in Australia have given Wang high level access to influential politicians. He is said to be close to Assistant Treasurer Josh Frydenberg and parliamentary secretary to the ministers for trade and the foreign minister, Steve Ciobo. 

Wang knows the chairman of the Australian Securities and Investments Commission, Greg Medcraft well thanks to a mortgage securitisation deal in 1999 which was lead managed by Societe Generale when Medcraft worked there.