|| This paper discusses the necessity for consolidation and the related problems of the securities industry in Taiwan as it increases its economies of scale. The logistical planning for consolidations in the industry is profiled within the context of the theoretical motivations and legal issues underlying the changes to this industry. The necessity for consolidation and expansion in order to achieve economies of scale is illustrated by drawing upon the past history of the Taiwan securities industry in the last 40 years as well as the present circumstances as the industry is threatened by the multi-industry structure of foreign conglomerates and the internationalized competitive environment. The combination of industry characteristics and market trends is presented to provide some suggestions for further development.|
In the past ten years (from 1990 to 2000), the securities industry in Taiwan grew at a very fast pace, with the number of firms increasing from 199 to 531, 2.66 times. The market capitalization grew 6.86 times, increasing to NTD 3.7 trillion from NTD 533 billion. The amount of corporate bonds and savings trusts issued in the foreign market increased to USD 9.6 billion in 2000 from USD 74 million in 1990. At the same time, as the Taiwanese economy took off and grew at an amazing pace, the trade surplus and balance-of-payments surplus brought wealth and prosperity to the people of this country. The money supply grew from NTD 5.78 trillion to NTD 19.46 trillion, giving Taiwan new potential as a place to underwrite and issue new securities. The market in Taiwan has expanded tremendously in order to meet the spectacular growth in demand for these services. The market expansion took place at a time when mergers were the dominant trend around the world, and the securities industry increased not only its economies of scale but also its economies of scope in order to face the tougher world competition in the coming years.
In November 1999, the securities industry witnessed a dramatic change in the market. Yuanta Securities and Core pacific Securities announced their merger plans and this lit a spark that led to the consolidation of large firms with sizes of a such magnitude that they have not been linked to firms active in the consolidation arena. In the future, Taiwan will ride the international merger wave that originates from the economies of scale and scope and many more mergers in the industry will take place to form companies that will combine the capital and foreign exchange markets in its operations. Through cross industry mergers and the establishment of holding companies, large scale securities and financial conglomerates will be formed. Securities and financial institutions in the domestic market and abroad will develop towards enlarging its size, increasing its lines of businesses, and expanding in the international market.
This paper looks at the development trends in the securities industry and discusses the necessity for consolidation and its related problems. Having worked in the industry for over ten years, the author has a keen awareness of the market characteristics and its trends, as well as intuition about what motivates the market. Throughout this research, the author has found that the market forces on a theoretical level that drive the need for consolidation have originated from a need to increase the economies of scale to deal with the increased competition in the international marketplace and have made consolidation a necessity so that the industry can remain competitive as internationalization unfolds. As a whole, this research has found ten conclusions with regard to the consolidation of the securities industry and makes ten recommendations to guide future developments as the industry seeks to increase its economies of scale.