Vous êtes sur la page 1sur 15

3.

INDUSTRY ANALYSIS
3.1. Profile Study
3.1.1 Background Industry

Brokerages are fairly diversified. A big chunk of the top line comes from filling buy and sell
orders from clients. There are two ways in which a broker can meet a client's trade request. The
broker can act as an intermediary, matching a customer's buy order with a third-party's sell
order and vice versa. In this capacity, the broker acts as an agent, receiving a "Commission". As
well, the broker can act as a principal, meeting a customer's order from its own inventory.
Revenue from this activity falls under the heading "Principal Transactions"; it may include gains
and losses on the brokerage's own investments. We usually classify fee-based revenue as
"Other". Fees are calculated as a percentage of a client's assets, and stem from managed
mutual funds and specialized, high-net-worth accounts.

Brokerages also report on the top line "Interest Income", consisting of interest earned on
investments and dividends, minus interest paid on debt. Lastly, a number companies generate
"Investment Banking" revenue through underwriting and advisory services, involving stock or
bond offerings and mergers or acquisitions. While Principal Transactions, Interest Income, and
Investment Banking revenues are tied to prevailing economic conditions, Commissions can be
more stable during down markets, especially if client trading increases.

The largest non-interest expense for full-service brokerages is workforce compensation.


Employees are rewarded according to the amount of commission, trading and/or investment
banking revenue that they contribute. They may receive either a percentage of revenue
generated or a year-end bonus. Discount brokerages limit their compensation exposure by
providing electronic services. Full-service brokers provide personalized service and in-house
research. Electronic brokers offer more bare-bones service to seasoned clients who are looking
to save on fees. A brokerage's profitability is determined by trading volume, fees charged,
worker compensation and fixed operating costs. In periods of high trading volume, brokers'
operating and net margins can easily expand into double-digit territory.

The companies in this industry have varying levels of debt on their balance sheets. Large
brokers, doing significant investment banking business, often carry heavy debt burdens with the
aim of maximizing leverage. Savvy investments can yield outsized gains, but serious missteps
can lead to hefty losses. Companies dependent on commissions tend to be managed
conservatively and hold lighter debt balances.
Stockbroking Industry in Malaysia define as a stockbroker is a regulated professional individual,
usually associated with a brokerage firm or broker-dealer, who buys and sells stocks and other
securities for both retail and institutional clients through a stock exchange or over the counter in
return for a fee or commission. Stockbrokers are known by numerous professional designations,
depending on the license they hold, the type of securities they sell, or the services they provide.

The history of stock brokers can be traced back to the origins of the first stock exchange in 1602
at Amsterdam. Even before that brokers are said to have existed in France dealing with
government securities. The Amsterdam Stock Exchange was involved in buying and selling of
shares for the Dutch East India Company. However, the first real stock exchange came up in
Philadelphia in the United States during the late 18th century. Later it was the New York stock
exchange which saw a rise in its popularity. Wall Street, as it was called, became the hub of
brokerage activities. Earlier stock brokers were largely unorganized, but later most of them
joined hands to form institutes and organizations. Till the 1980's stock broking services were
used only by the wealthy class who could afford them. Later with the advent of the Internet,
stock broking became very easy. Thus, the price tag on stock brokers lowered considerably and
their services became available even to the common man. The stock broking duties are now
mostly taken up by major organizations with the smaller companies being absorbed by them. In
India, too with increasing globalization the major corporations are penetrating deeper into the
Society.

Stock markets refer to a market place where investors can buy and sell stocks. The price at
which each buying and selling transaction takes is determined by the market forces (i.e.
demand and supply for a particular stock). Let us take an example for a better understanding of
how market forces determine stock prices. ABC Co. Ltd. enjoys high investor confidence and
there is an anticipation of an upward movement in its stock price. More and more people would
want to buy this stock (i.e. high demand) and very few people will want to sell this stock at
current market price (i.e. less supply). Therefore, buyers will have to bid a higher price for this
stock to match the ask price from the seller which will increase the stock price of ABC Co. Ltd.
On the contrary, if there are more sellers than buyers (i.e. high supply and low demand) for the
stock of ABC Co. Ltd. in the market, its price will fall down. In earlier times, buyers and sellers
used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most
of the operations are done electronically and the stock markets have become almost paperless.
Now investors dont have to gather at the Exchanges, and can trade freely from their home or
office over the phone or through internet.
The stock exchange provides investors the market place and facilities for the buying and selling
of their stocks and shares. The Bursa Malaysia, like other stock exchanges, was established to
meet two basic and complementary needs: businesses need for funds and an individual or
companys desire to invest savings efficiently (Ho, Niden, & Johneny, 2011)

The Bursa Malaysia is one of the important members of the global stock markets. In 1960, a
Malaysian stock exchange market has been established and in this market both Malaysia and
Singapore traded under currency interchangeable agreement. In 1973 the exchange split into
Kuala Lumpur stock exchange board and stock exchange of Singapore. The KLSEB has been
renamed the Kuala Lumpur stock exchange. Again in 2004 the KLSE was renamed to Bursa
Malaysia Berhad. In year 2007 the Bursa Malaysia had a market capitalization of US$189 billion
and in the same year the main index had a market capitalization of US$ 307 billion which is
called as Kuala Lumpur composite index (KLCI). It has divide the listed companies according to
his size and growth like the high growth companies listed in the MESDAQ market, the large size
companies listed in the Bursa Malaysia securities main board and the medium size companies
listed in second board (The stock exchange of Malaysia).
3.2. MARKET STUDY

Stock Broker or also commonly known as Participating Organization, which licensed trading in
Bursa Malaysia. The full list can be found in Bursa Malaysia website.

There are many Stock Broker or also commonly known as Participating Organization, which
licensed trading in Bursa Malaysia. The full list can be found in Bursa Malaysia website.

In 2014, both the total trading values and volumes increase when compare to 2013 by 0.75%
and 37.1% respectively. You can see that the surge in trading volume but only small increase in
trading value.

The top spot on 2014 for both the highest in terms of trading value and volume held by Affin
Hwang Investment Bank, which overtaking CIMB Investment Bank and RHB Investment Bank
respectively. It commands 16.83% of the total market volume and 12.10% of the total market
value. Affin Hwang Investment Bank is the merging entity of Affin Investment Bank and Hwang-
DBS Investment Bank.
The table below shows top 15 largest stock brokers trades in Bursa Malaysia in 2014 based on
Trading Value and Trading Volume.

NO DEC-16 TRADING VOLUME TRADING VALUE


PARTICIPANTING ORGANIZATION UNIT % RM %
1. MAYBANK INVESTMENT BANK 4,392,284,090 8.04 9,923,964,392.77 14.10
BERHAD
2. AFFIN HWANG INVESTMENT BANK 7,784,038,229 14.25 8,211,529,673.96 11.67
BERHAD
3. CIMB INVESTMENT BANK BERHAD 5,869,327,521 10.74 6,563,515,778.32 9.33
4. RHB INVESTMENT BANK BERHAD 6,431,235,508 11.77 5,909,697,933.82 8.40
5. KENANGA INVESTMENT BANK 7,017,979,251 12.85 5,522,652,958.46 7.85
BERHAD
6. CREDIT SUISSE SECURITIES 895,754,400 1.64 3,602,999,614.12 5.12
(MALAYSIA) SDN BHD
7. AMINVESTMENT BANK BERHAD 2,088,462,962 3.82 3,136,705,561.55 4.46
8. UBS SECURITIES MALAYSIA SDN BHD 735,058,131 1.35 2,969,548,868.77 4.22
9. MACQUARIE CAPITAL SECURITIES 2,608,504,302 4.77 2,694,779,626.11 3.83
(MALAYSIA) SDN
10. CLSA SECURITIES MALAYSIA SDN BHD 490,102,498 0.90 2,432,744,557.16 3.46
11. HONG LEONG INVESTMENT BANK 2,374,796,070 4.35 2,296,741,738.43 3.26
BERHAD
12. TA SECURITIES HOLDINGS BERHAD 2,397,904,054 4.39 2,150,422,175.22 3.06
13. NOMURA SECURITIES MALAYSIA SDN 427,839,269 0.78 2,144,434,254.16 3.05
BHD
14. UOB KAY HIAN SECURITIES (M) SDN. 1,292,352,917 2.37 2,091,335,005.14 2.97
BHD
15. CITIGROUP GLOBAL MARKETS 371,545,622 0.68 1,870,136,632.00 2.66
MALAYSIA SDN. BHD
16. APEX EQUITY 2,408,800 N/A 3,779,127 N/A

OTHERS 9,454,544,738 17.30 8,846,532,833.99 12.56


3.2. 1 Importance Of Stock Brokers

A stock broker or share broker is a regulated professional broker who buys or sells shares and
other securities through market makers or agencies on behalf of investor. A broker may be
employed by a brokerage firm. The
functions of stock broker are as follows.

1. Act as an agent: A stock broker acts as its agent of an investor and represents his
clients to buy or sell shares and other financial instruments. The primary role of a stock
broker is to execute transaction on behalf of investors, he will buy and/or sell securities
in the stock market. As a representative of his clients, a stock broker brings the best
offer to buy and sell stock.

2. . Seeks best deal: A stock broker represents a client, finding the best deal to buy or sell
stocks for investors. Most brokers deal in all types of securities and many also handle
commodity futures. The sub broker may also advice a client on when to buy or sell a
stock or what to watch for in market dealing, but he is not a licensed investment adviser.

3. Handling the trade: A broker takes an order from a client to buy


or sell a stock, passes it through his brokerage firms network to a floor trader.
Now, through the software provided by stock broking firm, investor/trader can directly
place the order.

4. Paid on commission: Individual brokers are paid on commission usually as a


percentage of the value of the trade. Commissions and fees vary.

5. Advice: Most of the individual broker charges a certain percentage of the transaction of
buying and selling of stock. There are two types of brokers,
one is discount and another one is full service broker. Discount broker mostly is
individual broker who wont give advice and simply does the transaction. On the other
hand, full service broker actually help the investors to choose the stock for
investment by giving advice, and charges some additional amount along with their
regular commission.
6. Spectrum of service offered:
a) Discount / online broker: The traditional discount/online brokers is an order taker. They
will take investors order either over the phone or online. On the
other hand, if investor is dealing with them online, one will be there to actually talk.
b) Discount/online with assistance broker: This variation offers some help to customers
that stops of full services consulting.
c) Full service broker: The traditional full service broker provides recommendation of
specific stocks for investors consideration. The broker begins with a financial
assessment of investors personal situation to determine the investors need and
suitability for various investments.
d) Money Manager: Money Manager takes over the responsibility for investing and
managing the entire portfolio in exchange for a percentage of the assets they manage.

7. Products: Brokers offer many different types of products besides stock. Often, packaged
products such as mutual funds and annuities are important parts of the
recommendation.

8. Insurance protection: Majority of the brokerage firms are members of the Securities
Investor Protection Corporation (SIPC) which provides insurance for losses suffered in
the event of financial difficulties and liquidation of brokerage firm to investors.

9. Offers special accounts: Additional services and facilities may be available in special
accounts that give the stock broker discretion to make traders for investors without each
trade being approved by the investors, known as discretionary accounts. Credit for the
purchase of additional securities may also be provided by its use of margin accounts.
3.2.1 MARKET PARTICIPANTS IN BURSA MALAYSIA STOCK MARKET:

I. Stockbroking Companies:
Currently, there are more than 35 stock broking companies which 14 are categorised as
Investment Banks. These banks offer services in the dealing of securities listed on Bursa
Malaysia Securities. Investment banks hold merchant banking license issued by Bank
Negara Malaysia under the Banking and Financial Institutions Act 1989 (BAFIA) as well
as Capital Markets Services license issued by the Securities Commission under the
Capital Markets & Services Act 2007. As such, investment banks are able to offer a full
scope of integrated capital market and financial services which include corporate
finance, debt securities trading and dealing in securities. One stock broking company still
holds the universal broker status. A universal broker is able to offer integrated capital
market services.

II. Trading Participants:


A Trading Participant is a company which owns at least one Preference Share of Bursa
Malaysia Derivatives to conduct business as a futures broker licensed by the Securities
Commission under the Capital Markets & Services Act 2007 and carries on trading in
Contracts traded on the Bursa Malaysia Derivatives.
3.2.2 GDP Contribution In Stockbroking Industry

Malaysian stock market capitalization as percent of GDP for that indicator, The World Bank
provides data for Malaysia from 1981 to 2016. The average value for Malaysia during that
period was 133.36 percent with a minumum of 51.77 percent in 1982 and a maximum of 320.99
percent in 1993. See the global rankings for that indicator or use the country comparator to
compare trends over time.

The stock market capitalization in Malaysia and other countries is calculated as the number of
shares traded on the stock exchange times their prices. It is a measure of the size of the stock
market in the country. It is usually reported as percent of GDP so that we can evaluate the size
of the stock market relative to the size of the economy.

Stock market capitalization of about 50 percent of GDP and more is an indication of a well
developed stock market. Yet, in most countries the stock market almost does not exist. The
capitalization there is close to zero. Have in mind that a large stock market capitalization does
not necessarily mean that the stock market is active. The stock market could be composed of a
few large companies whose shares are seldom traded.

Meanwhile, growth of the business services segment is supported by vibrant stockbroking,


shared services and outsourcing (SSO) activity as well as information technology (IT) services.
Strong growth in volume and value of transactions in the equity market, during the first seven
months of 2007, at 95.7% to 255,250 million units and 149.2% to RM381,570 million
respectively, spurred stockbroking activity (January-July 2006: 70.2%, 130,409 million units;
19.0%, RM153,111 million). The Kuala Lumpur Composite Index closed higher at 1,373.7 points
at end-July 2007 with market capitalisation of RM1,077.3 billion (end-2006: 1,096.2 points;
RM848.7 billion).
Malaysia Stock market capitalization, percent of GDP
In a summary the industry has a moderate to low level of competitive advantage. There is low
level of customer lock-in and customer will move his or her business if the brokerage rates are
not competitive with rest of the industry. The only competitive advantage for companies in this
sector comes from size and scale which enables them to leverage their size to reduce average
costs and thus make a profit on low brokerage margins.

In addition to high fixed costs, the industry has very low margin cost. As a result the cost of
adding an additional customer is low and per transaction costs are limited. Due to this reason,
we are seeing a constant pressure on the brokerage rates has intensified the competition in the
industry and is resulting in consolidation with the top players.

The basic brokerage business is now sometimes a loss leader to enable the brokerage firm to
acquire customers and sell other products such as wealth management services, or third party
mutual funds. This segment will provide adequate returns in the future for a company with scale.
PEST ANALYSIS OF BROKERAGE INDUSTRY

PESTEL analysis stands for "Political, Economic, Social, and Technological analysis and
describes a framework of macro-environmental factors used in the environmental scanning
component of strategic management. It is a part of the external analysis when conducting a
strategic analysis or doing market research, and gives an overview of the different macro
environmental factors that the company has to take into consideration. It is a useful strategic
tool for understanding market growth or decline, business position, potential and direction for
operations.

Political factors are how and to what degree a government intervenes in the economy.
Specifically, political factors include areas such as tax policy, labour law, environmental
law, trade restrictions, tariffs, and political stability.
Malaysia is a multi-party democracy country. The ruling party; Barisan Nasional has
been in power for more than 50 years. They helped provided the country with high
stability which attracting more business investing in the country. This proves to be a very
good move by the government. Due to the impressible sensitivity of the stock volatility,
stocks are subject to the impacts of many independent variables, such as changes in
interest rates or import and export.
Last August 24, the FTSE-Bursa Malaysia KLCI closed at a 31/2-year low of 1504
points, down 18.5% from its high of 1845 points in 2014. This massive selling stunned
the investing public. Several reasons for this state of affairs, but most agree that the
following are the most prominent of 1MDB case. This is the mother of all crises facing
Malaysians. It shames us all, says an economist. At the centre of the nationwide uproar
are the unknown factors related to the companys RM42 billion debt

Economic
An economic climate is a major factor in determining the primary trend of a stock
market. As such, the stock market is often regarded as a reliable barometer of a
countrys economy. In Malaysia, stock market contributes to the best allocation of capital
resources among numerous users. The roles of the stock market are mainly to facilitate
and encourage the mobilization of funds, direct them towards efficient economic
activities, provide adequate liquidity for investors and encourage the creation of
large-scale enterprises.
Currency woes and the ringgit is spiraling out of control. While this can be attributed to
falling commodity prices and other factors, the business community most affected by this
development point their fingers to the growing controversy surrounding 1MDB. Realising
the central banks apparent weakness, traders and speculators have taken to massive
selling of the ringgit.
Malaysia is often an attractive destination for foreign direct investments. Due to its
wide array of stocks from various sectors, there is also a strong net inflow of billions
of dollars into stocks and bonds from foreign institutional investors (FII).

Social factors include the cultural aspects and include health consciousness, population
growth rate, age distribution, career attitudes and emphasis on safety. Trends in social
factors affect the demand for a company's products and how that company operates.
Malaysia is a country of social diversities having different ethnic, races, customs, and
religions. The futures stoke broking market is not much affecting social factors but it
does not mean that social factors are not important to the futures market. Education,
health, saving of Malaysian is improving continuously. These factors directly or indirectly
influence futures market. For example, an improvement in the education of people is
likely to increase their employability. This in turn is likely to increase their income and
ultimately their savings. These savings may be directly or indirectly diverted to the
futures market and as a result liquidity and turnover of futures market is likely to
increase.

Technological factors include technological aspects such as R&D activity, automation,


technology incentives and the rate of technological change. They can determine barriers
to entry, minimum efficient production level and influence outsourcing decisions.
Furthermore, technological shifts can affect costs, quality and lead to innovation.
The advancement of information and communication technology is changing the
competitive environment in the futures market. The new trading method, internet trading,
has become a required distribution channel, taking the investors away from the
traditional trading. Many on-line Indian brokerage firms charged as low as 0.03 % of the
turnover as brokerage and the competition is continuous among the brokerage houses.
They are charging low brokerage to attract the customers. The Internet makes it
convenient for customers to do Futures trading. Traders can obtain real-time quotes,
place orders, and receive related market data, news, and services anytime anywhere,
no matter whether they are on a business trip or are at home. Internet trading is also
convenient because it is quick and easy to trade.
CONCLUSION

Markets today are more volatile and interconnected than it was 10 years ago.
Moreover everybody can access the same information as most analysts do and this somehow
levelled the playing field. One of the toughest challenges facing investors is keeping up with the
trend in the economy and how to use it to aid them in theirs investment decisions.

The stock brokers have seen an increase in the investment potential of the investors and there
are many people who are entering the stock market trade and the last few years has seen and
exponential increase in the people entering the stock broking trade. Hence in such a scenario, it
is the duty of the stock broker to make the small investor aware of the situation to see to it that
the small investor is not affected by such a withdrawal.

Despite of the economy downturn in 2015, MIDF Research said Malaysia could be one of the
beneficiaries should global money return to emerging markets, whose currencies and equity
prices had been in the doldrums for a prolonged period, in a big way in 2016
(Promising outlook for MalaysiaJs equity market next year, 2015). Is hope that Malaysian equity
keep on blooming in the coming years.