STOCKBROKING firms may face the grim prospect of having to cut jobs and salaries to trim costs should equity markets continue to worsen, industry sources say.

"The prospect is very real although I do think that Malaysian stockbroking firms will likely fare better than their regional or global counterparts," said an executive at a big local firm.

The departures of three individuals from the investment research team at ECM Libra Financial Group Bhd sent jitters through the stockbroking community recently, with rumours afloat that they were made redundant.

The group had slipped into the red in its 2008 second fiscal quarter.
ECM, when contacted, dismissed the rumours, saying that it had "no plans to cut jobs at the moment".

"There were three resignations in the research department in recent months," a company spokesperson told Business Times, declining to elaborate.

CLSA Asia-Pacific Markets, the Asia-focused brokerage arm of Credit Agricole, was reported on Monday to have initiated an innovative pay-cut scheme globally to avoid having to cut jobs.

Analysts said that cost-cutting measures were now deemed necessary as stockbroking firms were making starkly less brokerage income from the weak stock market.

"There's a conscious effort to control cost. If markets drag on like this, some may have to cut salaries or offer retrenchment packages or redeploy staff and freeze recruitment," said a source from a bank-backed stockbroking firm.

He was quick to add, however, that the situation had not reached a critical level in Malaysia.

"The Malaysian market is still relatively active with local funds buying and selling regardless of the global environment. There's still business to be done, just not as much," he remarked.

Daily average trading values in the first nine months to September were down 44 per cent compared with the same period a year ago. In the third quarter alone, it has fallen 60 per cent compared with the previous corresponding period.

Staff of at least two big stockbroking houses in Malaysia told Business Times that they had been asked to cut costs. These included costs on travelling, entertainment and recruitment.

Stockbrokers' earnings are already taking a hit.

ECM made a net loss of RM4.2 million in its second quarter ended July 31 2008 compared to a profit of RM23.9 million a year ago.

TA Enterprise Bhd, a stockbroker that has started to rely more on its property development business, saw net profit fall 12 per cent in the same quarter compared with a year ago.

OSK Holdings Bhd, also a brokerage and property group, saw a 31 per cent decline in net profit in the second quarter ended June 30 2008.