Weak profitability in Thailand's securities sector is likely to lead to greater impetus for consolidation, particularly for smaller independent companies that have weaker franchises, Fitch Ratings says in a new report. Profitability in the sector in 2023 is at the lowest level in over 10 years, on weak market activity and intense competition.
Increased consolidation may be positive for sector performance over the medium term. The fragmented industry and volatile earnings are constraints on the operating environment, and profitability pressures are likely to limit any near-term upside on standalone credit profiles.
Stock market trading volume has declined sharply from the peak in 2021, particularly for the retail client segment, and average commission rates have fallen but non-brokerage income sources have not been sufficient to offset the decline. Domestic financial market sentiment has also been hurt by several high-profile accounting scandals and defaults.
Fitch expects some stabilisation or improvement in sector earnings in 4Q23-2024, with a growing backlog of equity IPO transactions as potential upside. Still, securities performance and activity could be affected by global uncertainties.
The report, "Thailand Securities Sector: November 2023", is available at www.fitchratings.com or by clicking the link above.
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