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CMIA Drawing Global Banks towards South Korean Brokerages

Jul 19, 2007

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Global banks are hunting for small brokerages of South Korea, competing to enter the thriving fund and derivatives market of the country. The igniting force is the impending introduction of the Capital Markets Integration Act (CMIA) in 2008 (if everything goes as planned), which is expected to initiate a financial turnaround, integrating futures trading, asset management, and broking together. 
 
This will make packaging and sale of derivatives easier for brokerages and they can develop in-house funds, which can be sold in branches, a step to free brokerages from their infatuation with trading commissions. 
 
Choi Jong-won, a financial analyst at Tongyang Investment Bank, said, “The level of attractiveness of local brokerages has risen, along with their increased premiums. Once the Capital Markets Integration Act passes, brokerage companies will have a bigger influence and find it much easier to attract customers”, as reported by gulfnews.com on May 12, 2007.  
 
Consequently, a chaotic industry with over 40 brokerages has suddenly become luring to investment banks from West and local players. The companies operating in the brokerage industry worth over 23.5 Trillion Won (or over $25.89 Billion), by international measures, are cheap, as they are trading at a value lower than 12-times the earnings of 2007. As per the industry sources, Standard Chartered, Calyon (a unit of Credit Agricole), and Citigroup, all are interested in expanding into the local brokerage industry. 
 
But the big attraction is derivatives trading. The new Act is expected to allow trading for a broader range of securities, although existing holders will have to apply for permission again. The other pull is asset management, which is being expanded by brokerages even before the introduction of CMIA, thus making it more appealing to local lenders
 
The RNCOS report “South Korean Banking Industry Analysis (2007-2011)” has identified South Korean banking industry (financial institutions) a very stable and capitalized industry, and asset management is a vital part of this industry. Asset management companies had a share of over 7.2% in 1995 in financial institutions and it rose to over 8.4% at May 2005 end. In 2005, Allianz acquired 50% stake in Hana Bank’s South Korean asset management JV.
 
The market research report is a work of rational analysis of South Korean banking industry. It discusses the financial system, types of banks, and performance of banking industry in the country, together with the forces, opportunities, challenges, and future outlook.
 
For more information visit: http://www.rncos.com/Report/IM511.htm


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