UPDATE 1-Sanders Morris to sell its capital market business

Jan 22 (Reuters) - Sanders Morris Harris Group Inc (SMHG.O) said it agreed to sell a significant portion of its capital market business to Siwanoy Capital on undisclosed terms in an effort to convert itself into asset management company.

The sale will include Sanders Morris' investment banking, fixed income, and New York -based institutional equity departments, the mid-sized investment bank said.

"Although we think both units (wealth management and capital markets) have a strong future, we have been - and will be - focusing our resources on the wealth/asset management sector," Chairman George Ball said in a statement.

Sanders Morris will retain 20 percent interest in the business and the sale is expected to close in the second quarter of 2009, upon the formation of a new broker-dealer by Siwanoy Capital.

In August, the company had said it was looking for strategic options for its capital market business.

Shares of Sanders Morris closed at $5.10 on Nasdaq Wednesday. (Reporting by Sweta Singh in Bangalore; Editing by Amitha Rajan)