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Published on March 31, 2008

The Securities and Exchange Commission's policy to fully liberalise brokers' commissions in 2010 has forced trading houses to grope for a new operating model in order to survive.

Commissions are the bread and butter for all securities houses. The SEC's policy will create fierce competition in the industry, several houses forecast.

Kongkiat Opaswongkarn, CEO of Asia Plus Securities, said recently that the firm was now reorganising and developing its personnel to provide good service to customers in every line of business.

The move is a part of its strategy to diversify risk after commission liberalisation takes effect over two years. He forecasts that the brokerage business in 2010 will represent 50 per cent of total revenue, down from 66 per cent last year.

Revenue from the investment-banking business will increase to 20 per cent from 18 per cent last year, and revenue from asset management will jump to 15 per cent from 7 per cent, he said.

Asia Plus's investment portfolio this year will be larger than last year's Bt3 billion, particularly the overseas slice, which is expected to grow at least 10 per cent thanks to continuous investment in Japan, Russia and Brazil.

"We would like to expand to markets that provide good yields, particularly overseas, where we plan to allocate more money this year. The company has studied several hedge funds to be the investment arm for Asia Plus," he said.

Boonchai Sriprachaya-Anunt, managing director for investment banking at Kim Eng Securities, said the company would form a direct investment team to take positions in both listed and non-listed companies. Kim Eng expects to start investing this or next quarter with a war chest of Bt500 million-Bt1 billion.

"We have to focus more on direct investment because competition in the brokerage business will be serious in the next few years. In the offshore market, commissions represent 20 per cent of general revenue, while that from investment is at 40 per cent," he said.

Yarnsak Manomaiphiboon, president of Bualuang Securities, said the company would seek opportunities in new fields such as investment management in order to reduce risk.

The board of directors is studying opening an investment portfolio that has to support other businesses of the company and provide benefits to its clients. The project is expected to be concluded next quarter, he said.

An analyst from Asia Plus Securities recommends investors hold Bualuang Securities for its dividends because the stock price is near to the broker's fair price of Bt23.41.

The brokerage estimates the dividend yield for this and next year will be similar to last year's 3.7 per cent.

Bualuang Securities' fundamentals remain strong due to its partnership with Morgan Stanley, while Bangkok Bank supports its affiliate's investment-banking business. Asia Plus forecasts Bangkok Bank's revenue to stay flat this year at Bt211 million due to fierce competition.

An analyst from Kiatnakin Securities recommends a "buy" for Kim Eng Securities because the brokerage is still the market leader with an 8-per-cent share.

However, Kiatnakin has revised Kim Eng's earnings from the previous estimate of Bt714 million down to Bt667 million because some of its clients can shift to trading stocks on the Internet.

Siriporn Chanjindamanee

The Nation