Japan's Daiwa Securities Group plans to tie up with Brazil's Banco Itau in asset management, investment banking and broking as it aims to further expand outside the Japanese market.
Shares in Daiwa, Japan's second-largest brokerage behind Nomura Holdings, jumped 5.1 percent to 923 yen by midafternoon. That was roughly in line with the securities subindex, which gained 4.9 percent amid a rebound in Japanese stocks.
Daiwa has been taking steps to build up its operations outside the Japanese market, where it still generates 90 percent of its sales. The prospects for growth in Japan are limited given a mature economy and shrinking population.
"Up until now it has been Nomura that seemed to be making the aggressive moves overseas, and it has had some success in the investment banking area," said Fujio Ando, senior managing director at Chibagin Asset Management.
"But there is still an opportunity for Daiwa. And there should be no problem when it comes to financial firepower given that it has the backing of Sumitomo Mitsui," Ando said, referring to its main lender Sumitomo Mitsui Banking Corp.
Daiwa's focus has been on Asia. In the past month it has announced plans to raise its stake in Vietnam's Saigon Securities, buy convertible bonds in Taiwan's Neo Solar Power Corp and invest in a fund targeting Chinese companies.
Brazil has also been on its radar because of its rapidly growing economy and the high level of interest among Japanese individuals in Brazilian stocks and bonds.
Daiwa signed a memorandum of understanding (MOU) in May with Itau to form an alliance and has since been talking with Brazil's second-biggest private-sector bank on the details, according to Daiwa spokesman Hiroharu Misawa.
There are no plans for capital ties, Daiwa said.
As a first step in the alliance, Daiwa will later on Thursday announce a new mutual fund to invest in Brazil's financial markets. Itau will advise on what to put in the fund while Daiwa will use its network to market it in Japan.
Other possible areas of cooperation include investment banking, stock broking, research and personnel exchanges.
Daiwa could, for example, work with Itau to advise on cross-border mergers involving Japanese and Brazilian companies or use the alliance to help Japanese companies tap the local capital markets for funds.
Daiwa runs an investment banking joint venture with Sumitomo Mitsui Financial Group, Japan's third-largest bank. The venture, Daiwa Securities SMBC, is owned 60 percent by Daiwa and 40 percent by SMFG.