Singapore’s shrinking brokerage
industry is set to get even smaller as trading restrictions
planned by regulators dent profits, according to a body that
represents individual brokers.
The average daily value of shares traded in the city, which
slumped 40 percent in the first two months of 2014 from a year
earlier, will decline further should rules be implemented that
include requiring collateral for some trades and shortening the
settlement period, said the Society of Remisiers, which
represents dealers who work entirely on commission. Singapore
Exchange Ltd. and the Monetary Authority of Singapore proposed
the changes after a penny-stock rout in October erased $6.9
billion in market value of three companies over three days.
“More people will leave the industry as they’ll get less
business,” Jimmy Ho, president of the Society of Remisiers,
said by phone. “Once they cut the settlement period, there will
be less speculative trading and it will drag overall volumes.”
The number of stockbrokers in Singapore fell 8.4 percent
percent to 3,973 at the end of last year from 4,336 in 2011,
according to data from the bourse, as the industry was buffeted
by declining trading volumes and commissions as well as
competition from online trading platforms. The city’s benchmark
Straits Times Index trailed all its major developed-market peers
in the past 12 months and slid 2.2 percent this year.
Even after Singapore Exchange teamed with Singapore
Management University and CIMB Group Holdings Bhd. (CIMB) in April 2012
to provide training programs for the industry, traders’ ranks
continued to thin. This year, the bourse partnered with the
National Trade Union Congress’s Employment Employability
Institute to bolster interest in the profession.
Industry Adjustment
“Brokerages are able to cope with fewer dealers because
trading volumes are lower,” Society of Remisiers’ Ho said.
“That’s a natural adjustment for the industry.”
It will be hard to draw young people, given the high risk
and low commissions, said Yeo Aiqi, 28, who left Phillip
Securities Pte, the city’s biggest brokerage by clients, in 2011
after working three years there.
“Stockbroking appears to be a sunset industry,” Yeo, who
now sells women’s apparel at her online store
www.clothingcandy.com, said by e-mail. “Trading volumes are low
and commission rates are falling.”
The average value of shares traded on the Singapore bourse
tumbled 40 percent to about S$1.06 billion ($836 million) in the
first two months of 2014 from S$1.77 billion a year earlier,
according to data compiled by Bloomberg. Transactions in Hong
Kong fell 11 percent in the same period, while those on Japan’s
Topix index increased 17 percent.
Stock Rout
Blumont Group Ltd. (BLUM), Asiasons Capital Ltd. and LionGold
Corp. tumbled at least 87 percent over three days in October,
prompting the city-state’s central bank and bourse to review its
equity market structure. The companies said they didn’t know
what precipitated the plunges, which spurred at least a dozen
lawsuits from banks and brokers seeking to recover losses on
collateral held against margin loans.
SGX introduced circuit breakers last month to minimize
volatility in share prices and is seeking feedback from the
industry before it implements the collateral and settlement
period changes.
While the move is meant to revive investor confidence, it
won’t improve the outlook for brokers, said Gabriel Yap, who
left the industry in 2009 after 19 years as a trader.
“The casualties of the penny-stock saga are the
stockbrokers,” Yap, who now manages his own investment advisory
firm, said by phone. “If the clients don’t pay, the dealers or
the remisiers will have to cover.”
Shrinking Commissions
To make the profession more appealing, SGX needs to address
dwindling volumes to counter the decline in brokerage commission
rates, which have fallen to 0.1 percent of the value of shares
traded from 1 percent 10 years ago, according to Yap.
“Brokers have nothing exciting to recommend to their
clients these days,” Yap said. “Trading was buoyant before I
left the industry due to the influx of Chinese listings and now
investors are avoiding such companies after a number of them got
embroiled in accounting or stock manipulation scandals. SGX
promoted the listing of real estate investment trusts in the
past decade but interest in them is starting to wane.”
At least 28 Chinese firms on the exchange have been
suspended or delisted since 2008. There were 144 China-based
firms listed in Singapore at the end of February, according to
the exchange. The FTSE Straits Times China Index of 31 mainland
stocks sank 8.5 percent in the past 12 months.
REITs Sink
Singapore REITs had the third-worst return in the Asia-Pacific region in the past 12 months as rising bond yields made
the securities less attractive, according to data compiled by
Bloomberg. The FTSE Straits Times REIT Index tumbled 13 percent
in the period, compared with a 6.2 percent decline for the
benchmark Straits Times Index.
Stockbrokers are competing against online trading platforms
for business. Retail investors in Singapore are increasingly
using websites and apps to trade shares amid growing use of
mobile gadgets, according to a report by researcher Investment
Trends.
About 51 percent of the 460,000 brokerage clients in the
city traded shares online in the 12 months through September
compared with 49 percent a year earlier, according to the
report.
On top of imposing minimum collateral requirements on
investors and reducing the settlement period for stock
transactions to two days from three by 2016, the city-state may
also set up an independent listing committee and boost
enforcement, SGX and MAS announced on Feb. 8.
Orderly, Transparent
The proposals will help in “promoting orderly trading and
responsible investing” and “improving the transparency of
market intervention measures,” the central bank and exchange
said in a statement at the time.
The Securities Association of Singapore can’t comment on
how the proposed changes will affect brokerages pending
consultation with its members, Melinda Sam, chief executive
officer of the organization that represents trading firms, said
by phone. The group will submit its position paper by the May 2
deadline, she said.
Some stockbrokers have given up waiting for an industry
revival.
“The risk to reward just doesn’t work out,” Chin Chung
Hwa, who quit his job as senior vice president of corporate
broking at CIMB Securities Singapore Pte. in December. “I left
the industry to join private banking because it’s more stable
and clients must put money upfront.”
To contact the reporter on this story:
Jonathan Burgos in Singapore at
jburgos4@bloomberg.net
To contact the editors responsible for this story:
Sarah McDonald at
smcdonald23@bloomberg.net
Jim Powell
Singapore Broker Exodus Seen Quickening: Southeast Asia
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