S mall brokers with a market share below 2 per cent have been exposed to higher risk, because of the declining average daily trading volume.

Far East Securities CEO Chaiphan Pongthanakorn said brokers with a market share below 2 per cent would have to merge with others to survive tougher competition.

According to the Stock Exchange of Thailand's information, the 13 brokers are Far East Securities with a 1.64-per-cent market share, Phillip Securities (Thailand) with 1.56 per cent, Kiatnakin Securities with 1.49 per cent, Trinity Securities with 1.39 per cent, IV Global Securities with 1.11 per cent, BT Securities with 1.04 per cent, Syrus Securities with one per cent, United Securities with 0.95 per cent, Finansa Securities with 0.64 per cent, TSEC Securities with 0.58 per cent, Siam City Securities with 0.48 per cent, Kasikorn Securities with 0.42 per cent and Prudent Siam Securities with 0.28 per cent.

Earlier the Securities Analysts' Association estimated that if the average trading volume went lower than Bt18 billion it would have an adverse impact on brokers due to their high operating costs and shrunken income.

The average daily trading volume was Bt15 billion in May and Bt11 billion early this month. The sharp decline can be ascribed to persistent selling off by foreign investors, who have sold Thai shares with a cumulative net worth of more than Bt44 billion, so that the SET index has plunged more than 12 per cent since May 15.

However, Chaiphan said his brokerage house had no plan to merge with others because the company could keep costs under control.

"The chance of mergers and acquisitions is higher in the brokerage industry," he said. "Small brokers have to adjust, and mergers create a higher customer base. Increasing the number of foreign institutional investors is the key to survival as they constitute the highest proportion of investor types. However, it is difficult to attract foreign institutional investors as they have greater confidence in brokers relevant to foreign brokers than to small domestic brokers."

Siam City Securities assistant managing director Sukit Udomsirikul said small brokerage houses would have to look hard for more institutional investors because their trading proportion was greater than retail investors.

However, brokers whose parent firms are banks will be in a better position than others.

"Banks plan to offer a full array of financial services through banking, brokerage and mutual-fund business to create synergy. Brokers aligned with banks will have greater chance of survival," he said.

Meanwhile Kasikorn Securities chairman Rapee Sucharitakul said his house was negotiating with three or four potential foreign allies.

"We have yet to conclude in which areas - brokerage, investment banking or research - they will join with Kasikorn Securities," he said.

Institutional investors now account for 40 per cent of brokers' trading volume, the remainder being retail investors.

Siriporn Chanjindamanee

The Nation