Korean small and midsized brokerages streamlining amid asset market slump

DAOL Investment & Securities Co. headquarters in Seoul [Courtesy of DAOL Investment & Securities]

Small to mid-sized brokerage houses in South Korea are streamlining as they grapple with liquidity squeeze from lethargic investment activities in high interest rate environment and property project financing crumble.

According to multiple sources from the financial investment industry on Thursday, DAOL Investment & Securities Co. on Wednesday called upon employees to apply for early retirement until Nov. 28. Applicants will work until Dec. 31.

Those on permanent payroll after move from other companies eligible for the application would be compensated with six-month salaries in case of employment of less than a year, nine months’ worth for employment up to three years, a year’s worth for those with the company for more than three years and 13 to 18 months’ worth for longer. ‘

Managerial posts of 20 have offered resignation.

DAOL Investment plans to carry out organizational and management reshuffle to respond to mid- to long-term liquidity crisis.

“There had not been any new project financing deals in the second half of this year and market conditions remain uncertain in the first half of next year,” said an unnamed official from DAOL Investment. “We will examine business structure that focuses on investment banking and realign the organization mid to long term along with job cutback.”

DAOL Investment had earlier announced to sell its corporation in Thailand to secure liquidity.

Other small and mid-size securities firms are also expected to discontinue job renewal with mainly contract-based staff in project financing department.

CAPE Investment & Securities on Nov. 1 closed down its corporate business and research business unit and excluded some of the related employees from contract renewal list. EBEST Investment & Securities is also mulling reducing investment banking unit staff.

The ratio of irregular workers is higher than regular workers at small and mid-size brokerage houses.

According to each firm’s disclosure, 64 percent of employees at DAOL Investment was contract-based workers as of end of June, 63 percent at Meritz Securities, 52 percent at Hana Securities, 52 percent at Hanyang Securities, 40 percent at Hi Investment & Securities, and 35 percent at Daishin Securities.

Bigger brokerages are expected to deliver under 1 trillion won ($753 million) in annual operating income this year on sluggish investment banking and brokerage profit that led to a sharp decline in third quarter earnings.