Philippines Financial Brokerage Industry Research Report: Ken Research
by Rati Ram Business DeveloperResilient Financial Brokerage Industry
Even with declining equity trading, brokerage industry
in the Philippines is all set to catapult to one of the leading financial
services sector. Revenue for the
brokerage firms is primarily derived from brokerage fees in equity trading
which has been declining for past few years, even though the number of trading
accounts has grown significantly from 640.7 thousand accounts in 2014 to 1.08
million accounts in 2018. The market is growing both in terms of quantity of
people serviced and quality of service.
New brokerage firms have entered the market and are
focusing on developing technological capabilities to complement the rising
trend of online trading. Technological developments in trading and introduction
of new financial products in the market will act as a huge catalyst for growth
of brokerage market.
Improving Philippines Stock Market
Performance in SEA
The Philippines Stock Market has been one of the top
performers in Southern Asia even at the wake of external political disturbances
in South-Asia due to US-China trade war, etc. The brokerage industry which had
previously suffered due to volatility in equity market & regulatory
oversight has now seen significant changes leading to a stable economy which is
well-shielded from destabilizing macroeconomic factors from outside the Philippines.
The Peso has also stabilized over the past few years and is one of the
strongest currencies in Asia. Political stability has also played a significant
role in strengthening of the market, resulting in increase in investments by both
domestic & foreign investors in the past few years. A higher volume of
investment across all these segments increases revenues for brokerage players. The
Securities and Exchange Commission (“SEC”) implemented ASEAN Capital Markets
Forum (“ACMF”) Pass, which facilitates the movement of finance professionals
across international borders. This has integrated the financial services
community of ASEAN countries together to work towards a common goal of
financial services sector development in the region.
Online Trading Gaining Momentum
Traditional financial services firms and banks enjoy
a high customer base due to their first mover advantage and strong foothold in
the market. However, lack of technological advancements has limited their scope
and service quality. Online trading has started gaining momentum at the start
of the current decade and played a pivotal role in driving the retail brokerage
market. Online trading is transformed the traditional trading in Philippines
and it is expected that by 2025 around 70% of the trades would be placed
through mobile platforms. Introduction of discount brokerages could be the next
big thing that could alter the market dynamics greatly. The number of online brokerage accounts has grown at a staggering
CAGR of 37.0% from 2013-2018 whereas the proportion of traditional accounts has
declined from 72.7% in 2013 to only 42.6% during 2018. The no. of online
trading accounts has increased by 60.9% in 2018 reaching 625,673 accounts by
end of 2018.
Rebooting the Exchange
Commodities’ trading in the Philippines was suspended
back in 1996, owing to operational inefficiencies. The SEC is in process of setting
up a new commodities exchange to restart derivatives trading but is facing
problems in finalizing the products which can be commoditized and to gain
cooperation of different stakeholders. There is also a lack of consensus on establishing
a system of standardizing measures and verification and setting tax rules for
commodities trading. Rebooting the exchange will give the brokerage houses an
opportunity to capitalize upon additional financial products. The new segment
is expected to drive the brokerage revenue of brokerage firms in tune of 1.5X
to 1.75X as well provide better hedging opportunities attracting FDI in the
country.
Sustainable Future Growth with
Investor Education
Growth of Philippines Financial Brokerage Market is anticipated to be driven by
growth in trading volume through improvement in investor participation, surge
in implementation of new technologies, collaboration between financial services
firms, banks and fin-tech companies and growth of fin-tech firms. Economic
growth in past few years has raised the personal-deposable income of Filipinos
(especially the middle class), who are looking for other avenues to invest the
extra income apart from increased savings., In addition, the low- interest
rates in the Philippines have increased the demand for portfolio management and
advisory services. Investor education initiatives will also prove constructive for
the growth of brokerage industry as there is inertia amongst non-investing
population towards the investment industry. This is mostly due to their
misconceptions regarding presence of numerous financial & operational risks
in the industry. The emergence of new technologies like artificial intelligence,
block chain technologies & advanced data analytics is expected to transform
the way financial service firms operate. Digital disruption is also anticipated
to make Philippines financial markets more transparent, accessible, inclusive
and efficient. Moreover, it will also help the regulators get a better sense of
the risks that participants typically take and could help in identifying new
patterns of trading or system abuse in capital and derivative markets in real
time analysis. The industry is also witnessing higher demand for dealership
& portfolio management activities as the no. of ultra-high net worth
individuals( Net wealth > USD 50Mn) have grown from 13 to 400 during 2000-2017
and is likely to expand further at 10% a year in the next 5 years.
Expected Double Digit Growth
All these development might help in eradicating
barriers which has slowed the industry revenue in the past few years. The
revenue from commissions has declined at a CAGR of 5% between FY’2014 and
FY’2018 primarily due to the decrease in equity trading volume in the country.
We now anticipate the overall brokerage market to grow at a CAGR of 12.5%
between FY’2019-FY’2023. “Philippines
Financial Brokerage Market Revenue is expected to reach over PHP 12.5 Billion
by the year ending 2023”, according
to Namit Goel, Director Research, Ken Research
The various new avenues for this industry that are
expected to enter the landscape for the realization of this projection are
initiation of commodities & derivatives trading, Mutual funds market
expansion, introduction of discount brokerage business model in the market, digital
disruption models and many other competencies.
For more information on the research report, refer to below link:-
Financial Brokerage Market in India 2014
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Created on Jan 23rd 2020 05:49. Viewed 265 times.