Strengthening IB Business

Daewoo Securities cuts fees on shares traded on home trading system

Daewoo Securities Co., a leading stock brokerage in the country, has cut its fee on stock transactions to 0.024 percentage points from Oct. 15, which is considered to spread to other securities dealers.
The company said earlier that from Oct. 15, it will reduce the fee on the home trading system connected to bank accounts and the Web trading system.
It went on to say that the move is aimed at younger customers in their 20s and 30s to attract them to the stock market by making easier for them to transfer the funds from their bank accounts to securities accounts. But the company said the customers using the accounts is less than 1 percent of total number of people dealing in stocks.
The company said from last year, the company cut the fee to the same level charged by Korea Investment and Securities Co. on its "Bankis"service and the E-trade securities.
The new fee is lower than 0.029 percentage points charged by Mirae Asset Securities and 0.025 percentage points applied by Kium Securities, they said.
Daewoo Securities current fees varies depending on the amount of deals and for those less than 1 million won, 0.5 percent has been charged.
Securities industry sources said Daewoo Securities move is likely to spark a competition among other securities firms to cut the fees to keep their customers. Daewoo Securities has already lowered its fee changed on ELWs to 0.02 percent.
Seo Young-soo, analyst for Kium Securities said Daewoo's move will certainly force its rival firms to follow its move and spread the competition around the industry inevitably as Daewoo Securities has been providing very good services to customers taking advantage of its excellent research department.
Already other securities firms were said to have held emergency meetings to discuss their moves to cope with Daewoo's lead.
In the meantime, President Kim Seong-tae of Daewoo Securities said Daewoo will work very closely with KDB in the area of the IB business to pave the way for its growth as an international IB, taking advantage of the two companies'IB experiences and manpower and the synergy to created by the joint operation.
He said Daewoo will first take over from KDB its M&As, bond issuance management and others that are more private-sector oriented.
Daewoo will also consider assigning some of its IB professionals to KDB's overseas network of branches to strengthen its overseas IB operations. Daewoo will try to expand its global operations, now focused on southeast Asia to South America and Eastern Europe. Daewoo will also expand its business territories, too, by taking advantage of KDB's high credit ratings to enter such areas as M&A overseas, PI, PEF, ABS and others.
The Daewoo CEO said Daewoo will achieve 12 trillion won in capital and 2.4 trillion won in annual profit by 2015 backed up by KDB's vast financial resources and its high credit rating, which will be wings for Daewoo'take-off in its international operations in the future.
The Ministry of Finance and Economy said recently that Daewoo Securities Co. will not be auctioned off for a while and continue to be controlled by Korea Development Bank as its affiliate under the ministry's plan to develop it on the level of an international investment bank ultimately.
The core nature of the plan is to let Daewoo Securities take over the IB business from KDB and to be a leading IB in the country, the ministry explained, one of the reasons being that domestic securities companies would not be able to move quickly to turn themselves into IBs, although the new Capital Market Integration Law will come into force in 2009
. The ministry came to the conclusion that the government should lead the development of a leading IB as early as possible by combining the operations of KDB and Daewoo Securities. The ministry believes that the move is the short-cut to building a Korean version of major IBs in the world such as Goldman Sachs, Morgan Stanly and Merrill Lynch.
The MOFE projects that KDB will have a vital role to play in the financial sector yet. In short-term, the government-owned bank will have to provide finance to the development of regional, social development project and the knowledge industry, while in long-term, the bank would have to take care of the financial needs that will emerge in Northeast Asia, which will include various financial needs for North Korea when its relations with the outside world improves and eventually unite with South Korea although it could take decades. nw

President Kim Song-tae of Daewoo Securities Co.