| BUSINESSWEEK ONLINE : JUNE 14, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- ASIAN BUSINESS
In Asia, It's Ready, Set...Trade! (int'l edition) With government help, online investing is exploding in Asia American day traders, meet your Asian cousin. At intervals throughout his working hours at a South Korean bank, Song Tae Hoon takes a pause and reaches for his palmtop computer to monitor action on the local stock market or to execute a trade. Since he subscribed to Sejong Securities' electronic trading service two months ago, the 32-year-old Song has become an online-trading addict. ''I can access so much information,'' says Sung, impressed with the abundance of real-time data at his fingertips. Web-based trading appears to be going over as big in Asia as it has in the U.S. In a region where financial services have been pricey and information scant, the Internet is a godsend to the region's punters, who like to play the markets as if they were casinos. In South Korea, where April's $9.2 billion in Internet trades topped the total for 1998, some companies have had to install fire walls on office computers to block employees' access to stock-trading sites. In Taiwan, which only opened its market to online trading last year, 39 companies have begun offering it to investors. All the signs point to more explosive growth. Governments across the region are changing securities laws to make it easier and less expensive for investors to buy and sell stocks through their computers. And the competition is about to intensify. Companies ranging from established local and Western securities houses to U.S. online pioneers E*Trade Group Inc. and Charles Schwab & Co. are gearing up in Asia. ''Everybody has to have a cyberstrategy,'' says Jonathan Slone, managing director of Credit Lyonnais Securities, which just launched an online service in Hong Kong. ''It is de rigueur.'' Online trading is likely to bring big changes to Asia's coddled financial industries. By reducing the cost and risk of introducing new investment products, it boosts liquidity in Asian bourses, helping the region's economic turnaround. Net trading also will force Asia's capital markets to become more transparent as investors start demanding the abundant research and stringent disclosure standards of U.S. markets, which are now just a click away. While it's just a tiny portion of market activity, Web trading already is starting to shake up the brokerage industry. Investors can now bypass the clubby cartels of local brokerages that have controlled the region's stock exchanges. Because these firms had near-monopolies, they could charge high fees for transactions without offering many services. So far, dynamic new players are driving the business. Take Polaris Securities Group, one of Taiwan's top online brokerages. Until the island allowed Internet trading last year, Polaris and its 26 branches had never been a major force in the financial sector. Now, Polaris it can compete against bigger rivals by charging 35% less to handle trades done online. ''We can expand our business without having to spend on computers, personnel, or branch offices,'' says Jeffrey Wu, Polaris assistant vice-president. Polaris does about $20 million of trades a day online, 10% of its volume. Such success stories pose a threat to more traditional Asian firms. In Hong Kong, for instance, the bourse has long been dominated by some 450 small brokerages. They have used their voting clout on the exchange to impose minimum commission rates, preventing competition from discount brokers. Hong Kong also has lagged in technology. Online traders can't execute trades through computer networks because Hong Kong's system still requires that trades by typed in manually. The result ''is not true online trading,'' says Jeffrey Goh, business development manager for Phillip Securities in Singapore. Last month, Phillip opened a center with 30 computers for local day traders in Singapore, where brokerages can transmit orders directly to the exchange. SAME SCREEN. Hong Kong's regulators are trying to move the obstacles to online trading. By next year, they expect to install a more advanced trading system. The resulting competition will likely force many of the smaller firms out of business. ''As restrictions ease, the local industry will become more exposed to the global market,'' predicts Mark B. Duff, managing director of Boom.com, a new Hong Kong brokerage that plans to offer online trading in both Hong Kong and U.S. equities. Because investors can play both markets on the same screen, Duff says, they'll soon notice the big difference in commissions and services. Henry Tjoa, a self-employed broker, already has been forced to make the transition. Tjoa, 38, used to offer advice to clients, accept their orders, and then pass the sales on to a securities firm to execute the trade. ''That business is basically over,'' he says, since a customer will just go online and do the trade himself. So Tjoa set up his own Web site, Henry's Investment Mall, that offers special trading advice and links to financial news sites. ''People like us,'' says Tjoa, ''have no choice but to shift to where the market is moving.'' More serious competition will come with the arrival of leading online firms. E*Trade will launch in Japan soon and plans to enter South Korea later this year. It wants to offer trading services in Hong Kong and Southeast Asia by early 2000. Charles Schwab, which has announced a brokerage joint venture in Japan, offers Hong Kong customers access to U.S. markets but is ''looking very seriously'' at allowing customers to trade Hong Kong stocks, says Regional General Manager Christina Hui. Interactivebrokers.com, a subsidiary of Timber Hill Group in Greenwich, Conn., is rolling out a series of online futures and options products in Hong Kong and hopes to offer similar services elsewhere in Asia. Big local brokerages such as Hong Kong's Sun Hung Kai are setting up cyberplans as well. To be sure, there are risks. Because the instant access to other markets will make shortcomings in corporate disclosure and oversight more noticeable to investors, countries with weak standards could be more vulnerable to the next financial shock. Because the Internet makes it easier to move money in and out of different markets, ''an investor will have the ability to cast his economic vote a lot more freely than in the past,'' says Mark Dickens, executive director of Hong Kong's Securities & Futures Commission. ''Regional markets and companies are going to have to lift their games.'' By forcing this change, the Internet will help Asia emerge from its economic slump. Asian brokerages enjoyed easy growth during the region's good years, but now the Net is exposing them to global competition as never before. If that leads them to provide customers with better and cheaper service, Asian investors and companies could be big winners. By Bruce Einhorn in Hong Kong, with Jennifer Veale in Seoul, Jonathan Moore in Taipei, and Louise Lee in San Mateo, Calif. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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