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Foreign robots are eating into Thailand’s trading business

BloombergBANGKOK (Bloomberg) — Thailand’s domestic brokerage industry will continue to face shrinking revenues as foreign institutional investors increasingly replace local retail customers — and pay lower trading commissions.

A higher proportion of foreign program trading will remain “a major threat” to the brokerage industry because they pay “extremely low fees” to trade, according to Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Market Organization (Fetco), a trade group that counts brokerage firms and mutual funds as its members.

Domestic securities firms posted a “disappointing” 72 percent slump in first-quarter earnings as brokerage commissions slumped, the Association of Securities Companies, a trade group of brokerage companies, said in a June report. Asia Plus Group Holdings Pcl, the nation’s second-largest stock brokerage by market value, suffered a 48 percent drop in profit, while Finansia Syrus Securities Pcl and AEC Securities Pcl also reported losses.

“The brokerage industry is facing one of its toughest times,” said Montree Sornpaisarn, chief executive officer at Maybank Kim Eng Securities (Thailand) Pcl. “A lot of our retail customers have stopped trading because they are frustrated with the effect of high-frequency and machine-generated trading.” The firm’s first-quarter profit sank 78 percent to the lowest level in a decade, according to Bloomberg data.

Computer and program trading will increase, following trends elsewhere, said Pakorn Peetathawatchai, president of the Stock Exchange of Thailand. The bourse is trying to add more products and services so those brokerages can expand revenue sources, he said.

To be sure, KGI Securities (Thailand) Pcl, Thailand’s biggest stock brokerage by market value and only major securities firm in the country to report higher first-quarter earnings, said gains on investments in derivatives, debt and other securities helped counter a slide in brokerage fees when it posted a 20 percent profit increase for the period.

The firm has trained its equities marketing staff as financial consultants who can also sell fixed income and structured financial instruments among other products, said Lin Chih-Hung, KGI Securities’ Bangkok-based chief operating officer.

Nomura Holdings Inc.’s local unit also sought revenue beyond equities trading by expanding its business to offer wealth management services to about 60,000 individual customers in June. That came after the brokerage posted its first quarterly loss since 2010 in the January-March period, according to data compiled by Bloomberg.

Thai equities have attracted an influx of foreign funds as political stability improved. Foreign investors accounted for 42 percent of total trading turnover in the first half, almost double their 22 percent share in 2015, according to Stock Exchange of Thailand data. Trading by local individuals dropped to 35 percent this year from 59 percent in 2015. Half of the trading volume by foreign funds was via program and computer trading, according to Fetco’s Paiboon.Speech

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