Among the market's active sectors, finance and securities proved a solid disappointment overall for investors, with only six out of 30 companies offering a positive total shareholder return (TSR) for 2005.

The average one-year TSR for the sector was -9.1%, ranking fifth worst in the market and sharply underperforming the 20.2% one-year gain for the market overall. Stocks in the sector, which includes finance companies, securities brokers, leasing and consumer finance companies, uniformly underperformed, with the notable exception of Adkinson Securities, MFC and Globlex, which each posted returns of 40% or higher for the year.

Analysts said the poor results were somewhat predictable, given the strategic challenges faced by the industry. Leasing and finance companies are continuing to lose their market shares to larger commercial banks, which are increasingly turning to niche markets to complete their universal banking business models.

Securities brokers, meanwhile, suffered from the general downturn in the stock market last year, when average daily turnover stood at just 16.4 billion baht, compared with 20.5 billion in 2004. According to the Stock Exchange of Thailand, net profits for securities companies totalled 2.58 billion baht in 2005, down from 5.17 billion the previous year, as brokerage fee income fell 24% overall.

Delays in major listing deals such as Egat, CAT Telecom and Thai Beverage also hurt investment banking revenues in 2005, while rising interest rates raised funding costs for brokers and finance companies alike.

Still, the medium-term TSRs for the sector show a brighter picture, at 12.4% over three years and 23.5% over five years, although well underperforming the 43.1% and 32.6% overall figures for the SET.

The wide divergence in returns reinforces the importance of selective investment for investors looking at this sector. MFC, the only pure assetmanagement company in the sector, rose an impressive 48.8% for 2005, in part on investor expectations that the state-owned company would see a pickup in fee revenues on advisory deals for the government's infrastructure programme.

Adkinson Securities (ASL), a midranked brokerage whose stock has attracted regulatory attention over the past several years due to high speculation, led all stocks in the sector with a 54.4% return. Gains were purely driven by capital gains driven by speculators, given that the company reported a 2005 net loss of 244.1 million baht on revenues of 614 million, a sharp decline from profits of 0.35 million on revenues of 824 million the previous year.

Two small leasing companies -- Group Lease (GL) and Ratchatani Leasing (THANI) -- also posted double-digit returns for 2005, even as their larger peers such as Phatra Leasing (PL) and Siam Panich Leasing (SPL) both posted negative shareholder returns.

National Finance (NFS), the largest in the sector by market capitalisation and asset size, had a modest 3.9% gain for 2005, while Kim Eng Securities (KEST), petitive advantage as their branch netthe market brokerage leader, showed a works offer a distribution channel for services such as mutual funds,'' he said. 25.4% loss for the year.

The two listed consumer finance companies, Aeon Thana Sinsap (AEONTS) setting up direct subsidiaries or consolidating past investments to diand Krungthai Card (KTC), rectly offer asset management, both posted negative TSRs securities brokerage or leasing of around 10-11%, due in services themselves, such as part to regulatory restricKasikornbank's new Kasikorn Setions on the credit-card and curities and Kasikorn Leasing, personal-loan markets.

According to Therapong cent takeover of Siam Panich Wachirapong, research diLeasing. rector at Phatra Securities, ``Investors looking at the fiprospects for 2006 looked nance and securities sector no better than last year, both should be looking at the universal in terms of dividends and Karoon: Aims to boost operators. Otherwise, you have capital gains. to consider the specialist firms

``Firms in this sector don't non-interest income that you are confident can rejust compete with each other, but with the banks, thanks to the main competitive in the future,'' Mr changing regulatory framework,'' he said.

Competitive pressures will be a greater wntrend over the past two years was influence on profitability and growth than likely to continue. At Siam Panich Leasing, president any other factor, Mr Therapong predicted.

``No one can prove whether a special- Karoon Laoharatanun said rising funding ised or convenience model will work. It costs and market competition affected seems instead that scale matters, and profits for 2005. SPL posted a modest pickup in net that the banks definitely hold a competitive advantage as their branch networks offer a distribution channel for services such as mutual funds,’’ he said. Indeed, local banks are increasingly setting up direct subsidiaries or consolidating past investments to directly offer asset management,
securities brokerage or leasing services themselves, such as Kasikornbank’snew KasikornSecurities and Kasikorn Leasing, or Siam Commercial Bank’s recent takeover of Siam Panich Leasing.

‘‘Investors looking at the finance and securities sector should b looking at the universal operators. Otherwise, you have to consider the specialist firms that you are confident can remain competitive in the future,’’ Mr Therapong said, adding that the downtrend over the past two years was likely to continue.

At Siam Panich Leasing, president Karoon Laoharatanun said rising funding costs and market competition affected profits for 2005.

SPL posted a modest pickup in net profits, reporting profits of 875.27million for 2005 compared with 848.7 million the previous year.

Mr Karoon said the company had moved to boost non-interest income through services such as life-insurance policies for customers.

‘‘In any case, we expect that competition in the leasing market will remain very aggressive this year. Managing cost will be the key, with the one who has the lowest cost being the winner,’’ he added.

Apichat Nantaterm, a director at Aeon Thana Sinsap, meanwhile insisted that the company’s stock was undervalued by the market given that dividends and operating profit continued to grow.

‘‘As far as the declines in our stock price goes, this depends on market sentiment. We remain confident that our fundamentals remain strong,’’ he said.

‘‘For 2006, even with rising funding costs and an expected moderation in consumer spending, we believe we will see continued improvements in our operating results.’’

Aeon ended 2005 at 32.75 baht, down more than 7% from the year before,compared with a 6.8% gain for theSEToverall.