Survival of the fittest
Brokerages in Southeast Asia are preparing for tough times ahead. Liberalization of fees and technology are radically changing the landscape for financial firms in the new millennium. In Thailand, the number of broking houses has fallen by almost half over the past three years as the Asian financial crisis took its toll. The survivors are now facing pressure from eroding margins under a new commission structure now being introduced.
In Malaysia, the government is mapping out a so-called master plan to further consolidate the industry and brokerages fear possible cuts in fees in line with the trend in other Southeast Asian countries - although no official plans have been announced. And in Singapore commission rates are being drastically reduced as part of a programme by the local exchange to introduce freely negotiable fees over four years. At the same time, the need to invest in e-trading in an already highly-competitive market is putting further pressure on profits.
One response is to grow in size. Two of Singapore's leading stockbrokers, Vickers Ballas and GK Goh, are merging to form what is expected to be the region's largest and best capitalized brokerage. The new entity, Goh Vickers, will have S$1 billion ($588 million) in shareholder funds and a market capitalization of about $1 billion.