Speech on Motion on Supporting the Securities Industry in Development

Finance is a leader industrial sector in Hong Kong contributing significantly to well being of the territory. People often take it for granted that those who pursue a career in finance are well-dressed and well-paid. It is an illusion. As an English idiom says, “You’ve got your troubles; I’ve got mine.” The reality is that many people are striving to survive even in a leader industry. This Motion calls for support to the development of securities industry. It reveals the hardship of small and medium securities dealers. Market is tough and they are in the red for years. They are indeed “half-dead” and badly need government assistance.

People always say that securities brokers earn high income. They did in the good old days, particularly small and medium brokers. I am told that earnings are instable in recent years and actually low in most cases. Many of them, as reported, are finding part-time jobs to help make ends meet. The hardship of brokers is illustrative of small and medium dealers.

In my view, bear market is a major factor. The global economy is in doldrums following the financial tsunami and European sovereign debt crisis. Securities markets also lack agility. Mass investors would not trade frequently when there was no profit opportunity. And, the lethargy would knock on small and medium dealers.

Another factor relates to industrial development. With the popularity of internet trading, banks and large dealers are gaining ground with comparative advantages. Banks are strong in capital and extensive in services. They could offer more privileges and better services to win customers. A leading bank is now offering free brokerage for five years. Small and medium dealers could not even match such offer. How could they compete?

That said I am not implying that small and medium dealers would not survive. As long as they stay innovative and adaptable, they would not close their doors. I am not trying to criticize that the Government might have given undue weights to large firms. I am just urging the Government to look beyond policy gains in future. The Government should consider policy impacts on the industry as a whole, particularly those “under-privileged”. The Government should help them pursue sustainable growth and should not consider them secondary to overriding benefits. Actually, regulation of the financial industry is becoming meticulous in recent years, securities, banking and insurance alike, and thus putting undue pressure on practitioners. I ask the Government to consider broader implications before proposing any new policy in future.

Apart from government assistance, securities dealers should continue with self-strengthening and explorations. For instance, they might consider reforming their business, changing their mode of operations, improving their services, and even extending their scope of business including the Mainland market, etc. Admittedly, some ideas would require Government support to realize. I am sure that our Financial Services Panel and fellow learned Members are more than pleased to follow up.

On the other hand, lack of scale is another factor troubling small and medium dealers. It makes them uncompetitive. They should find ways to expand their scale of operations and capital. For instance, they might consider mergers and alliances to improve operations and achieve economy of scale. If so, their adaptability and personalized services would become comparative advantages for competing with large firms. Of course, merger or alliance would lead to business reorganization. It would not be an easy decision for proprietors. However, it deserve due consideration as a means of improving competitiveness.

Lastly, in my view, the Government should offer financial assistance to struggling dealers, like interest-free loan, levy exemption and tax concession etc. At least, it would give them a breathing space to survive and consider their future.

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