The nation's crowded securities sector needs to reduce the number of players through consolidation to sustain profitability amid head-to-head price competition, Fitch Ratings said yesterday.
"The industry is too fragmented to maintain long-term profitability," Jonathan Lee (李信佳), senior director of financial institutions at Fitch Ratings' Taiwan branch, told a media briefing yesterday.
A combination of about two major securities firms with a market share of more than 10 percent, five to six medium-to-large players with a market share of between 7 and 8 percent, plus several small rivals catering to niche markets could create ideal market conditions for the nation's securities industry, Lee said.
There are more than 140 securities firms nationwide, according to the Fitch report.
Yuanta Core Pacific Securities Corp (元大京華證券) is the biggest player in Taiwan, with an 8.1 percent share in the brokerage business. It accounts for more than 60 percent of securities companies' revenue. The securities firm's business is far ahead of the rest of its top 10 rivals, which mostly have a market share of between 4 and 5 percent, according to Fitch.
Medium-sized securities firms with weak capitalization and a relatively small market share of between 1 and 4 percent, like Taiwan International Securities Corp (金鼎證券) and Concord Securities Co (康和證券), should consider acquiring rivals or being acquired, Lee said.
Meanwhile, business expansion across the Taiwan Strait is one of the options that would allow Taiwanese securities firms to expand, if they are allowed to operate in China, he said.
Taiwanese securities firms may not be able to compete with foreign rivals for the underwriting of big clients, but they are capable of securing business in the brokerage and underwriting of small to medium-sized corporate clients and individuals in China, he added.