Market hit by surprise KLS exit

The recent market fluctuations have taken their toll on KLS

Ha Hoai Nam, Kim Long Securities (KLS) chairman,  on March 2 said it would shut down all its ineffective brokerage activities to shift to a completely new business industry.

Accordingly, Kim Long Securities will change into KimLong Holding Corporation with key businesses of capital and financial investment, property trading, information technology and e-commerce.

The HNX-Index of Hanoi Stock Exchange (HNX), the bourse KLS floats shares on, plunged sharply, closing last week at 90.93 points, a 4.23 point loss (4.5 per cent) within two sessions as market investors heard the news.

At the same time, KLS, which used to be considered as “barometre” of the HNX-Index, also fell to the floor, closing at VND10,700 a share on March 4. “We were very surprised to hear the KLS news,” Nguyen Quang Bao, Ban Viet Securities deputy general director, told local media.

“KLS’ news will weigh down investors’ weak sentiment for an extended period,” said Duong Hong Ha, Tri Viet Securities chief analyst.

Ho Chi Minh City Securities Corporation (HSC) analysts said that the market had been a bit concerned about KLS’ decision to stop brokerage services and might result in it offloading its current stock portfolio, but that seemed unlikely.  “In fact by exiting its high cost brokerage business it will probably make substantial cost savings going forward and be able to focus on more profitable business lines,” said a senior HSC analyst.

KLS suffered a VND172.82 billion ($8.86 million) un-audited loss in 2010. Accordingly, 2010’s earnings per share (EPS) was negative at VND106, compared to positive VND5,088 in 2009. While KLS reported the big loss, there was still over VND1,800 billion (86.9 million) in cash.

The HSC analyst added that consolidation was a word often spoken, but very rarely seen in action. “This KLS move signals that the number of brokers will drop further over the coming months and reinforces our feeling that medium term to longer term things will get a lot brighter in the sector,” said the HSC analyst.

Vincom Securities also announced to reduce its brokerage services to focus on property segment. Later, Vincom, the major stake holder of Vincom Securities, informed to sell all 75 per cent stake in the brokerage.

In Vietnam, there are around 105 securities firms.