Hyundai Auto Will Buy Stake in Broker

SEOUL, South Korea, Hyundai Automotive Group said it will acquire a controlling stake in Shinheung Securities, entering the capital markets ahead of next year's planned deregulation.

The two groups said Hyundai Automotive had signed a memorandum of understanding Friday to buy a controlling 29.8% stake, or 3.5 million shares, in the small securities firm. Hyundai Automotive didn't disclose the acquisition price and details of which affiliates would finance and lead the deal.

Hyundai Automotive is composed of Hyundai Motor Co., Kia Motors Corp. and other affiliates. The group has been involved in the consumer-finance business through its Hyundai Capital and Hyundai Card divisions, which are joint ventures with General Electric Co. of the U.S.

Shares of Hyundai Motor rose 1.4% to 67,000 won ($71.46) yesterday, while shares of Shinheung Securities dropped by the 15% daily limit to 24,400 won.

Interest in the Korean securities market has grown ahead of legislation going into effect in February, 2009, that is expected to offer more freedom to securities firms in developing and marketing products.

"Like others, Hyundai would aim to grow as an investment banking firm, but it may have to continue to rely largely on the retail brokerage business at the initial stage as the local investment banking market is still immature," said Lee Chul-Ho, an analyst at Korea Investment & Securities. "Hyundai's entry is unlikely to be a major threat to others, in general. Instead, the crowded market could deal a blow to Hyundai in building up its presence."