Petition presses Tung for rethink on fees
More than 200 members of the brokers' union will petition Chief Executive Tung Chee-hwa this week to keep the minimum brokerage commission.
The brokers will also use the petition, comprising signatures of 3,000 brokers, to bring Mr Tung's attention to Thailand's recent reversal of a decision to abolish minimum charges.
On January 14, just months after scrapping minimum brokerage fees, Thailand restored the 0.25 per cent minimum commission.
'Thailand has restored the minimum brokerage commission, and we would like to urge the SAR Government to rethink scrapping the minimum commission system in Hong Kong,' said Simon Tam Cheuk-hung, spokesman for the Hong Kong Securities and Futures Industry Staff Unions.
Thailand scrapped the minimum charge in the hope that reduced transaction costs would lead to an increase in market turnover.
However, turnover continued to drop in line with market sentiment, while the resulting price war dragged down the quality of services as brokers pared operating costs in a bid to survive, Mr Tam said.
He said Thailand's experience should ring warning bells for the SAR Government.
'The experience in Thailand has shown that scrapping the minimum brokerage commission will not necessarily boost turnover, but it definitely will hurt brokerage houses' income,' he said.
Hong Kong Exchanges and Clearing, under government pressure, will abolish the 0.25 per cent minimum brokerage commission on April 1 in an effort to make Hong Kong a more competitive market place.
Mr Tam warned that the abolition would force many small brokers to close down and many others to lay off staff.
Hong Kong has about 500 stockbrokers and Mr Tam estimates the removal of the minimum commission would force up to 200 of the smallest players out of business.
Mr Tam said the number of brokers in Hong Kong had already fallen to 507 today from 571 in 1999, due to difficult market conditions.
The Hong Kong Stockbrokers Association has estimated that about 7,500 jobs, or one in every four in the industry, will be lost when the minimum commission is scrapped in April.
Mr Tam said the closure of smaller brokerages would also hurt retail investors, who could face higher transaction costs by switching to larger houses.
The union urged the Government to delay scrapping the minimum commission until the economy improved.
The association has proposed the adoption of a two-tier system, under which commissions would be negotiable for large transactions, but fixed at 0.25 per cent for those less than HK$500,000.