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. Last Updated: 07/27/2016

Brokerages Feel Effect Of Sanyo Bankruptcy

TOKYO -- News of Sanyo Securities Co. Ltd.'s business failure sent the share prices of smaller Japanese securities houses tumbling Tuesday, and the weak trend may continue for a while, analysts said.


But they added that the impact on the industry and the stock market could be positive in the long run, as Sanyo's collapse, announced Monday, could shake up the sector and force brokers to offer better services.


"This is the beginning of more restructuring in the securities industry, and investors' stance on brokerage shares will become more and more selective," said Harushige Kobayashi, deputy general manager at Yamaichi Securities Co. Ltd.


Brokers said this cautious stance could put added pressure on securities houses already in poor financial health.


"Sanyo's failure is likely to damage brokerages, depending on their credit risk. It may trigger a flight of funds from those which are struggling with financial difficulties," said a broker at a major Japanese securities house.


Late Monday, Sanyo Securities announced that it had filed for bankruptcy protection from its creditors, the first such failure by a brokerage in postwar Japan.


Following the announcement, shares in the brokerage sector slipped, with the exception of some "Big Four" securities houses.


Shares of Sanyo Securities were only at 54 yen at the end of Tuesday's session, against the previous session's close of 84.


Shinichi Ichikawa, strategist at Credit Lyonnais Securities, said greater competition would have a positive impact on the brokerage sector in the long run.


"Competition among securities houses in Japan, including foreign brokerages, will intensify, and this will push down brokerage fees and attract customers," he said.


But some analysts said the prospect of financial aid to other brokerages in trouble could hurt the securities industry's competitiveness.


Keiko Kondo, strategist at Merrill Lynch Japan Inc., said: "If more brokerages go bankrupt, those in good financial health and banks will have to provide more funds to them, raising concerns in the industry and the stock market."


Nomura Securities Co. Ltd. said Tuesday that it was preparing to provide up to 10 billion yen to a deposit insurance fund to help protect customers of Sanyo Securities.