| BUSINESSWEEK ONLINE : DECEMBER 13, 1999 ISSUE | ||||||||
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| FINANCE
Korea: A Nation of Cybertraders Led by big brokers, Koreans are flocking to buy stocks online Yeom Ju Yeol finally found what he really wants to do for a living. Earlier this year, he stopped working at his father's jewelry shop. Now, he spends most of his day trading stocks either in front of his home personal computer or at one of 68 booths at the PC salon in Seoul, where he can navigate the World Wide Web at higher speeds. ''Price changes, spreadsheets, rumors, news--you can get all you want instantly online,'' says Yeom, 33, who does as many as 30 trades a day. By trading at such a feverish pace, Yeom figures he can make his $85,000 in seed money grow tenfold in two years. Cybertrading fever has hit Asia--and Korea has it bad. An estimated 1.4 million Koreans have invested via the Internet this year. While media attention has been focused on the U.S., Korea has achieved one of the highest levels of online broking penetration in the world. The Korea Securities Dealers Assn. says 38.3% of all stock trades, including those by institutional investors, were transacted online in October. They were worth some $71 billion. In January, only 4.7% of trades were conducted electronically. ''There's no sign the pace is letting up,'' says association researcher Shin Dong Chul. It helps that many Koreans smell easy money in the stock market: The economy is recovering faster than most expected, and the main KOSPI stock index has soared to around 1000 from a low of 280 in July '98. Besides helping keep the market buoyant, the electronic rush has transformed the Korean securities industry. Local brokerages didn't wait for the likes of Charles Schwab & Co. or E*Trade Group Inc. to arrive on the scene. The country's top five houses, which account for 66% of volume, all say that online trades already account for more than half of their share transactions. The Big Five offer cut-rate commissions of just 0.1%, roughly one-fifth of what their branches charge for traditional trades. They have been joined by some 2,000 PC salons, such as the one frequented by Yeom, that now serve as trading centers. Many were started by entrepreneurs using the severance pay they collected after being let go by bigger companies during Korea's financial crisis. So many new investors are throwing money into the market that some economists worry that they could rock Korea's wobbly financial system. ''The flip side of rapid change into such a liquid market is a growing danger of instability,'' warns Seoul National University economist Chung Un Chan. But other analysts believe the efficient and open nature of the Internet will spur financial reform. ''Changes introduced in share trading will no doubt accelerate reforms in other areas,'' predicts Song Kwan Ho, president of Korea Network Information Center, which is in charge of allocating Internet domain names. To compete for consumers' funds, for example, banks will likely have to slash costs and become much more transparent. OUT IN FRONT. Brokerages that jumped in early have realized benefits. LG, for example, was Korea's No. 3 brokerage when it began investing in the Net in 1997. Since then, it has leapfrogged Hyundai and Daewoo to become the largest. LG's 300,000 online accounts generated $10.2 billion in transactions in October, second to Daishin Securities. That was 6% of all Korean shares traded that month. The firm's 1,000-strong conventional sales force serves about 100,000 clients. Its 59-member cyberteam serves 300,000--and handles trades for about one-tenth the cost to LG. ''In the Internet Age, you become competitive or die,'' says LG Internet marketing director Pyo Soon Do. That foresight also has made LG a prime partner for foreign players. On Nov. 26, E*Trade and Japan's Softbank said they will start a new Korean online brokerage in which LG will own a 15% stake. As other foreign houses take note, more heavyweight competition is sure to arrive. And cybertrading mania is likely to get a lot more contagious. By Moon Ihlwan in Seoul _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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