Rising chances for Asian brokers|en
[ 01-08-2016 ]
Rising chances for Asian brokers
Many Asian brokers, including domestic firms which suffered difficulties in unsound market and improper abroad expansions are now having more chances thanks to increasing equity-trading volumes.
Effect of market volume to Asian brokersAsian investment banks and Asian brokers are gaining good profits after years of unfirm performance and market unpredictability that discouraged many investor. According to Emmanuel Pitsilis from Asian corporate and investment-banking McKinsey & Co.'s, “What drives their destiny of the majority of Asia brokers is market volume. When market volumes are good, their earnings are good." Take Japan as an example, the optimistic idea of the government to defeat deflation and recreate the economy improved stock-market trading volume up 46% from January to March a year ago. Thanks to that, the earnings of two of the country's biggest brokers, Nomura Holdings and Daiwa Securities Group Inc., became trebled. These two brokers also benefited from cost cuts and retrenchment in accordance with foreign expansion within financial crisis. Nomura achieved biggest gain ever in seven years last week, while Daiwa also reported the best 3 month profit in seven years.
Effect of market volume to Asian brokersAt the same time in Southeast Asia, trading volume has been raised along with the improvement of markets and the region's billionaires have engineered multibillion-dollar mergers. At DBS Group Holdings Ltd. in Singapore, fees from trading stocks and investment banking have been raised twice as much as before, hike up to US$83 million between January and March. It endorses initial public offerings, including the US$1.3 billion IPO by a real-estate investment trust by Mapletree Investment Pte. which focused more on China, amidst a boom in trust listings in Singapore this year. Thailand has an especial attractiveness to brokerages. Trading volume in first 3 months went up to US$125 billion, twofolds the US$59 billion last year, As seen from data by McKinsey, Jefferies, the American middle size investment bank, recently cooperated with regional partners in Thailand and Indonesia. Meanwhile, Nomura began to cover Thai equities late last year. For brokers in China, fortunes also come. China’s markets were almost all mired in the red last year until when a recovery in December urged trading volume higher. Chinese brokers have performed well in spite of a government suspension on initial public offerings last year. The two biggest enterprises the Citic Securities and Haitong Securities Co. claimed to achieve higher income in the first three years in line with the brokerage income at more than 20%.
Risk for Asian brokersIt is risky for Asian brokers to realize on trading. For example, 60% the income of Chinese brokers comes from equities trading, which put them "at the mercy of equity markets and turnover, as well as their mainly retail investor base," according to Bonn Liu, a partner at KPMG China. Not only Chinese brokers but others are also vulnerable amid higher competition and electronic-focused trading by investors. H.V. Vinayak, a partner at McKinsey said this vulnerability has cut into trading commissions around the region,. McKinsey report the average commission on an Asian stock trade went down from 0.14% in 2007 to 0.11% of trade value last year.
Risk for Asian brokersAlso, trading volume has dropped in several markets inluding China recently. The return of IPOs, suspended because the market regulator tried to eliminate wobby candidates, could raise income at companies such as Citic Securities. Silvia Fun, an analyst at CCB International, said the IPO moratorium has hurt Citic, the largest underwriter of share sales in China. Achievements of Asian brokers in Japan may not last long as well. Nomura Chief Financial Officer Shigesuke Kashiwagi said that great business environment would not last forever and it is necessary to diversify profits."