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Struggling brokerages face merger prospects

Update: June, 30/2012 - 08:42

HA NOI — Securities companies are beginning to publicly acknowledge the need to comply with the Ministry of Finance restructuring scheme approved earlier this year, calling upon weaker brokerages to merge.

APEC Securities Co (APS) has become the first securities company to publicly announce its intention of merging into another securities firm in accordance with the restructuring plan.

APS chairman and CEO Nguyen Do Lang said many brokerages had had to narrow the scope of their operations in order to adapt to the gloomy situation on the stock market. "Over 100 firms operating on the market is too many, so reducing this number in the near future is inevitable," Lang said. "Whether big or small, the top criterion for another firm to become our partner is that they must have a competitive edge which cand help APS increase its own competitiveness after the merger."

APS has a charter capital of VND390 billion (US$18.6 million) and has incurred cumulative losses of VND83.5 billion ($4 million). Last year, it posted a loss of VND91 billion ($4.3 million) and its staff was reduced from 180 to 60. In the first three months of this year, it returned to profitability, posting a modest profit of VND4.8 billion ($230,000).

APS has been an average brokerage in terms of market share, but as competition in this industry had became increasingly severe, APS was unlikely to advance into the top 10-15 companies within the next five years and increasingly likely to begin encountering difficulties, he said.

Because trading on the stock market had remained sluggish for a lengthy period of time, many securities firms had been unable to earn enough money to offset their operating costs, said Trinh Hoai Giang, deputy director of HCM City Securities Co (HSC), one of the 10 leading securities companies on the HCM City Stock Exchange.

"Therefore, discarding brokerage services or acting to merge with other companies will be inevitable steps for small firms in the near future," Giang said, adding that the process would be easier for companies clear of debts and with highly liquid portfolios. — VNS

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