Brokerage market could see significant shifts

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Brokerage market could see significant shifts

The local brokerage market is expected to face big changes in the second half, as major conglomerates have looked to sell their brokerage arms as part of their self-restructuring initiatives.

Industry insiders discussed deals on Wednesday as Hyundai Heavy Industries (HHI) - one of the big three shipbuilders suffering from mounting debt and low global demand - announced it would sell its 85.3 percent share of its affiliate HI Investment & Securities and the management rights by the end of this year, in exchange for additional financial help from KEB Hana Bank, its largest creditor.

HI Investment is the industry’s 16th-largest firm, with an estimated price of more than 826 billion won ($697 million) as of the end of last year. This is slightly smaller compared to HHI’s acquisition of HI Investment from CJ Group for more than 1 trillion won in 2008.

A number of large brokerage firms, including Korea Investment Holdings, Shinhan Financial Group and HMC Investment & Securities, could be looking to expand their businesses by purchasing HI Investment, industry insiders say.

The local financial industry is fostering partnerships between the brokerage and investment banking sectors as the banking industry sees profit declines.

Korea Investment already lost out twice in the M&A game for Daewoo and Hyundai Securities, but wants to grow its key affiliate Korea Investment & Securities into a universal investment bank by 2020 to manage 200 trillion won. Shinhan also aims to expand its brokerage business, as the traditional banking business is seeing falling profits.

HMC is an affiliate of Hyundai Motor Group.

In the brokerage community, rumors have circulated since earlier this year that Samsung and SK Group are also reviewing to sell their brokerage arms to shave off their non-core businesses and gain liquidity.

Industry insiders say a sell-off of Samsung Securities may help obtain cash needed in establishing a financial holding group with Samsung Life Insurance by making the rest of the group’s financial affiliates subsidiaries.

SK Group has to sell 10 percent of SK Securities’ stake held by SK Holdings C&C to meet a local fair trade regulation that bans an industrial holding company from owning a financial affiliate. SK Corporation last year merged with SK C&C to become the group’s holding company.


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