Thai brokerages pivot beyond commissions

Thailand's securities brokerage industry is accelerating its transformation as declining commission fees and volatile trading volumes continue to pressure profitability, prompting firms to diversify revenue streams beyond traditional brokerage services.

According to Pichet Sithi-Amnuai, chairman of the Association of Thai Securities Companies (Asco), the sector's ability to weather the downturn depends on trading activity, capital strength, and the success of new investment products that can attract a broader investor base.

Consolidation is a natural part of the brokerage industry, he said, particularly among smaller firms facing capital constraints and shrinking margins.

However, mergers and acquisitions (M&A) are often complex and take longer to materialise than expected, said Mr Pichet, who is also president of Bualuang Securities.

Daily market turnover remains the industry's most important health indicator. With an average trading value of 40-45 billion baht per day, many brokers could continue to struggle financially. In contrast, turnover of around 60 billion baht per day would allow most firms to remain profitable and operate more sustainably.

Capital adequacy is another critical factor. Smaller brokers with tight net capital ratio positions may eventually need to raise capital or pursue consolidation to strengthen their balance sheets and remain competitive.

Bank-affiliated brokerages enjoy a significant advantage thanks to stronger capital bases and established customer networks, reducing the urgency for consolidation, he noted.

M&A EFFORTS

Despite efforts by regulators and the Stock Exchange of Thailand to facilitate consolidation, M&A activity has remained limited.

ML Thongmakut Thongyai, chief executive of Krungthai XSpring Securities, said the industry continues to attract new entrants seeking niche opportunities, even though securities brokerage has long been viewed as a mature or "sunset" sector.

Many operators prefer to remain on the sidelines rather than pursue acquisitions or sales, even under difficult business conditions, he said.

Structural challenges also persist. Thailand's investor base has expanded modestly over the past decade, with the number of investment accounts rising from roughly 2 million to 3 million. While about 74% of Thais have savings, only around 14% actively invest, limiting opportunities for brokers to significantly expand their client base.

Meanwhile foreign brokerages continue to enter the Thai market, intensifying competition rather than reducing the number of industry players.

NEW PRODUCTS

As traditional commission income becomes less reliable, brokers are expanding into wealth management, investment banking and proprietary investment businesses.

Among the industry's fastest-growing products are depositary receipts (DRs), which allow Thai investors to gain exposure to leading overseas stocks and markets through local trading accounts.

DRs are particularly popular among retail and younger investors because they provide convenient access to global investment opportunities while supporting portfolio diversification.

Brokers view DRs as an important gateway for attracting new investors into Thailand's capital market, noted Mr Pichet.

In contrast, derivative warrants continue to appeal primarily to investors seeking short-term trading opportunities and higher-risk strategies.

ATTRACTIVE VALUATIONS

Industry leaders see a more constructive environment for Thailand's equity market in the second half of the year.

Supportive factors include easing geopolitical and political uncertainties, attractive equity valuations, and signs of returning foreign investment flows.

The continued development of new investment products, as well as efforts by policymakers and market participants, are critical to strengthening long-term market competitiveness, he said.

If average daily trading value can recover to 50-60 billion baht, confidence among brokerages would improve significantly, allowing firms to move beyond survival mode and focus on sustainable growth, according to Asco.

While the association does not intervene in members' business strategies, Mr Pichet said it serves as a bridge between brokers and regulators, while promoting industry development, knowledge sharing and the creation of new investment opportunities.

For Thailand's brokerage industry, the path forward likely depends on diversifying from commission income to focus on scale, innovation and the ability to attract a new generation of investors.