Automaker takes over brokerage

With a year to go before the implementation of a new law that allows securities firms to sell more financial products, nonfinancial companies are speeding up their bids to take over brokerages.
Hyundai Motor, Korea’s largest automaker, yesterday signed a memorandum of understanding with Shinheung Securities to buy a controlling 29.76 percent stake in the local brokerage. Under the agreement, Hyundai will purchase 3.45 million shares, Hyundai said.
It is the first bid by a nonfinancial firm to take over a brokerage since June 2007, when Eugene Group, a construction conglomerate, bought Seoul Securities. Seoul Securities changed its name to Eugene Investment and Securities this month.
Financial firms are also buying brokerages. Kookmin Bank, the nation’s largest lender, took over the Hannuri Securities in November 2007, and Doosan Capital, an asset-based lender, purchased BNG Securities Brokerage on Jan. 5.
“The sale of Shinheung to Hyundai is not the end of the trend of nonfinancial companies advancing into the brokerage industry,” said Chun Bo-seung, an analyst specializing in brokerages at Hanwha Securities. “It is rather the beginning.”
There have been 54 local brokerages since 2002, when the Financial Supervisory Service banned new entrants into the industry. In 2002, the industry suffered billions of won in losses in the 12 months ended March 2003, which the watchdog concluded was the result of there being too many players. Brokerages that are already owned by conglomerates, including Samsung Securities and Hyundai Securities, were mostly taken over in the 1980s and 1990s. Last year, however, the Financial Supervisory Service began allowing mergers and acquisitions in the industry in a bid to spur consolidation.
The watchdog wants to make it possible to create brokerages that can compete on the global level ahead of the implementation of the Capital Market Consolidation Act.

By Moon Gwang-lip Staff Reporter [joe@joongang.co.kr]