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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Tough times for broker firms

Tough times for broker firms

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1Tough times for broker firms Empty Tough times for broker firms Sun Jun 17, 2012 3:31 am

sriranga

sriranga
Co-Admin
A majority of Sri Lanka’s stock brokerage firms are presently going through a tough time financially due to thin volumes of shares traded in the stock market, The Nation reliably learns. At present, the island’s capital market is being served by 29 stockbroker firms of which six firms were granted licenses in the year 2010, a period when the market was experiencing a bull run, whilst another three firms entered the industry last year.

“Out of the brokerage firms, the old and established ones are doing somewhat okay. But the new entrants are presently feeling the pinch financially due to the overall decline in the average daily turnover in the CSE in recent times and rising competition levels at broking houses,” a top market source said on the condition of anonymity.

Ownership of stockbroker Arrenga Capital changed hands in April 2012, with the Softlogic group acquiring the company, and analysts do not rule out further changes of ownership in the industry given difficult market conditions, despite the improvement in sentiment this week.

According to unaudited financials submitted to SEC, total turnover and net profit of the stock broking industry decelerated sharply by 13% and 34% respectively during the year 2011 compared to the year 2010. The industry’s net capital at the end of 2011 also fell by a quarter to Rs.3.35 billion compared to the net capital position recorded at the end of 2010.

“Given the fall in the average turnover levels year-to-date in 2012, where it had fallen to even lesser than Rs.200 million a day on some days, brokerage firms are definitely having a tougher time than last year,” the source said.

During the month of May, both the ASPI and MPI fell 11%, with the ASPI having now witnessed a 34.8% YoY decline while the MPI declined 37.0% YoY. Average daily market turnover during the month was recorded at Rs.398.7m.

“What worsens the broker’s scenario is the fact that salaries and other perks nowadays are comparatively much higher in the industry than what it used to be a few years ago. This is partly due to the rapid increase in the number of players which has created a heavy demand for personnel. This has led to many firms luring staff from other firms by offering better packages,” an analyst pointed out.

Meanwhile, despite the entry of new players to the industry, another market source questioned whether the new entrants have brought anything new to the market in terms of increasing the portfolio of investors or introducing new technology.

“I have already gone on record to say that for a small capital market like CSE, the number of stockbrokers we have at the moment is too high. But this is my personal opinion. It is now a battle for the survival of the fittest. As long as they are all conforming to the rules and regulations we have no problem,” the Chairman of the SEC, Thilak Karunaratne said when asked for his opinion.

During the year 2011, some of the key regulatory concerns the SEC encountered of stockbroking companies were the non compliance with the Minimum Net Capital Requirement, inadequacy of client funds to settle creditors and deficiencies identified in Management Information Reporting System (MIRS) and internal controls, the SEC had stated in its Annual Report.
http://www.nation.lk/edition/biz-news/item/7183-tough-times-for-broker-firms.html

http://sharemarket-srilanka.blogspot.co.uk/

2Tough times for broker firms Empty Re: Tough times for broker firms Sun Jun 17, 2012 9:47 am

K.Haputantri

K.Haputantri
Co-Admin
Some of the broker firms are only reactive & not proactive. There is hardly any research input to facilitate investors. The advice given is not that reliable. Very few conduct awareness programmes to their clients. They expect SEC to do all these and also want subsidies to open up their branches!!

Recent NSB/TFC fiasco unearthed areas some of the brokers are very good and active. ?Can any one expect a thriving share market with these fellows. I doubt.

3Tough times for broker firms Empty Re: Tough times for broker firms Sun Jun 17, 2012 11:57 am

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
@K.Haputantri wrote:Some of the broker firms are only reactive & not proactive. There is hardly any research input to facilitate investors. The advice given is not that reliable. Very few conduct awareness programmes to their clients. They expect SEC to do all these and also want subsidies to open up their branches!!

Recent NSB/TFC fiasco unearthed areas some of the brokers are very good and active. ?Can any one expect a thriving share market with these fellows. I doubt.

Partially agreed with you.
Most of the investors want quick buck, which they fall prey for these broking huts.
We investors need to do our own research, how many of us are willing to do?
You can get some experience in this forum regarding the attitude of our participants, who are one part of investors at CSE.

After 2009 May most of the broker huts employed school leavers to handle the bull market investors.
Both investors who came into the market after the war with greed and the advisor who were employed by broker huts behaved like head less chickens. That's the main reason what we are experiencing right now.
Remember Mr.Market always correct.

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