Although stock market turnover perked up yesterday, this month is set to be the quietest by average daily trade since late 1996. With market players saying the rest of the second quarter could be just as bad, there are concerns that brokerages may have to consider further cost-cutting measures, including more lay-offs. 'People are saying there is not one securities house that is making money,' one broker said. 'If you're working for a house that's not committed for a long time, you should be worried.' In anticipation of a slow year, many brokerages shed staff, closed departments and cut pay late last quarter and early this year. A few brokerages pulled out of Hong Kong, others were merged or collapsed. Daily trade this month has averaged $6.18 billion, down 32 per cent from April last year and 60 per cent from the average for the whole of last year. Brokerage directors are putting a brave face on the situation, pointing out that first-quarter volumes were above most expectations, which makes this month's lower investor interest easier to endure. 'We had a meeting with our shareholders and head office in October [last year],' ABN-Amro Asia managing director David Roberts said. 'It was clear then that life in Asia was going to be quite difficult. 'It's a cyclical business. We've all been there before. We had a good run in Asia, now we have a few months of pain.' Like many brokerages, ABN-Amro is forecasting a stronger second half. Tai Fook Securities deputy managing director Lennon Chan Wing-luk said he estimated average daily turnover would rise to $10 billion in the second half, up about 60 per cent from present levels. 'We cannot dream of the more-than-$30-billion days of last year, but $10 billion will be reasonable,' Mr Chan said. Others doubt the suggestion that most brokerages are making losses under present conditions. One director at a medium-sized European brokerage said his company could break even with turnover at $6 billion. 'Most Hong Kong brokerages are probably making a slim income, or at least breaking even,' the director said. 'The main problem is they're having to subsidise other brokerage operations in the region.' In the wake of the Asian financial crisis, institutional and retail investors have fled domestic markets. Fidelity Investments business director Edmund Lacis said even many Asian-based investors were funnelling cash into other markets, particularly Europe. In the run-up to the launch of the euro, Europe has enjoyed greater merger and acquisition activity, while countries with traditionally riskier currencies - such as Italy and Spain - have seen lower interest rates, which have drawn more money into equities. 'From ma and pop investors to the bigger fund managers, we're seeing a lot more interest in Europe,' Mr Lacis said. He said many fund managers were generally positive about Hong Kong companies because of their low debt rates, good management, relatively better transparency and, at the moment, reasonable valuations. 'If interest rates don't change [in the United States], you may see some money coming back to Asia,' Mr Lacis said. 'In Hong Kong's case, the issue has been currency. See how it comes through a couple of quarters [of high interest rates], see the impact on earnings, how China growth continues. Then maybe you'll see some people coming back.' Mr Lacis thought many funds were holding a lot of cash, which could quickly be moved into the market if investor confidence improved. Lipper Analytical Services data confirmed cash balances in many Hong Kong and China funds had risen, with some keeping 27 per cent of their portfolios in cash. There is some evidence that retail investors are warming again to Hong Kong. Over the past month, HSBC Investment Funds claims to have seen a strengthening of retail interest. 'Retail investors are definitely putting more money in as far as we can see. There's a trend in place,' managing director Christopher Ryan said. He said if interest rates continued to fall, investors would be reluctant to renew time deposits taken out when returns were unusually high with the currency under pressure. 'I think the cash will build up until the medium-term direction is clearer,' Mr Ryan said. 'We would expect a substantially better second half based on the fact that the beginning of the trend seems to be under way.'