"The brokerage market is very fragmented in Taiwan," Wu said. Taiwan currently has more than 300 brokers, with an average of less than 0.5 percent market share per broker.
Wu, therefore, expects the current consolidation to continue for at least two more years until the top ten brokers will control around 60 percent of the market. Unlike the prohibitively high initial capital requirement for Taiwanese banks, brokers are easy to set up in bull markets -- the key factor behind the large number of brokers in Taiwan. "During the good times, there is usually a mushrooming of new brokers," an analyst said. "And during the bad times, they either close shop or look for buyers."
But providing the tool to conduct the mergers are high stock prices of securities firms, which have recovered sharply from their recent lows. Mergers are carried out mainly by share-swaps.
"It is a very easy and straightforward way for conducting mergers," Wu said.
Clearly, while the major driving force behind the consolidation is the "fear" of being beaten in the competitive world of the stockbroking, the rally in the markets and the recovery in the economy are providing them with the courage to cut these deals confidently.
Brokers are making the right decisions by announcing the mergers, because whoever refuses to do so may be forced into that other type of "restructuring."
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