|
|
Get Four
|  | JANUARY 19, 2006
By Kenji Hall and Ian Rowley How Cell Phones Roil Japan's StocksTrading via high-speed handsets is wildly popular among individuals, but it has a downside: It helped propel the Jan. 18 sell-offMeet Tatsuya Kabuto, prolific blogger and part-time day trader. Kabuto had a bad feeling about the Tokyo bourse on Jan. 18, the day after allegations of securities allegations against top internet company Livedoor sent stocks into a tailspin. But he wasn't anywhere near his trading tool-of-choice, a PC at home with a superfast Internet connection. So Kabuto did what has become a daily -- make that hourly -- ritual for himself and a growing number of tech-savvy Japanese investors: He reached for his cell phone. Within minutes of logging into an online brokerage account, Kabuto knew the market was tanking -- and he disposed of his entire $33,000 stake in Japanese bookstore chain Village Vanguard. "The share price was falling so fast I was afraid that I might be in for big losses," says Kabuto, who writes his Kurosuappu Kabushiki ("Stock Close-Up") blog under a pseudonym and declined to be identified by his real name. "It was over in two minutes." CLAMSHELL CLAMOR. Kabuto wasn't alone. As the benchmark Nikkei 225 stock average nosedived this week, plenty of ordinary Japanese investors were shedding shares as fast as the professional brokerage traders. Both the pros and the amateurs were spooked by allegations that Livedoor had broken securities laws (see BW Online, 1/18/06, "High Drama on the Tokyo Exchange"). But analysts think individual investors who dashed off trades from their online accounts had a hefty role in the three-day sell-off, which had dragged the Nikkei index down 7% by Jan. 18 and strained the Tokyo Stock Exchange's trading system to the breaking point. Many of those tech-savvy investors in their 30s and 40s were placing sell orders with the flick of a button on a clamshell cell phone with a speedy wireless connection. Cell-phone stock trading is a new phase of Japan's permanent love affair with tech. In November, the value of trades made via mobile phones by brokers Matsui Securities, E*Trade Securities, and Monex -- three of Japan's major online brokers -- hit 1 trillion yen ($8.7 billion) for the first time, a rise of 90% over the year before. Even Korea, arguably the only country on a par with Japan when it comes to mobile Internet use, shows little interest in such trading. Why is wireless becoming the way to go for Japan's market junkies in Japan? Much of the answer lies in the way the country's mobile industry evolved in the 1990s. Back then, pricey per-minute charges over regular phone lines discouraged consumers from getting Internet access at home. Many Japanese simply found it cheaper to sign up for Web-enabled cell phones instead, which had an added benefit for city dwellers who spend an average of two hours daily commuting to and from work. UNIQUE RECIPE. Nearly every Japanese now owns a cell phone, and many have the superfast third-generation, or 3G, connections. As a result, most Japanese have become accustomed to surfing the Net from a handset long before doing so from a PC at home. "Here, there's almost seven years of robust mobile-Internet services. It's a trusted platform," says Philip Sugai, assistant professor of marketing at International University of Japan who has researched mobile-phone-user behavior in Japan. Add to that the 40% surge in Japan's Nikkei 225 index last year, which lured in thousands of new individual investors, plus Internet companies like Livedoor that are combining stock splits and high media profiles to attract investors, and the result was a recipe for cell-phone trading like nowhere else. Merrill Lynch Japan Securities estimates that 80% of all individual investors here own an online account, most of which offer cell-phone trading. Brokers say 10% to 20% of traders supplement online broking with mobile-phone-based trades. In terms of trading volumes, a BusinessWeek survey of Japan's top five Net brokerages -- Monex Beans, Rakuten Securities, Matsui Securities, E*Trade, and Kabu.com -- suggests that orders for at least a tenth of the money traded by online brokers come by cell phone. That's double the proportion from a couple of years ago. Individual investors accounted for more than a third of the $5.7 trillion worth of stocks traded on the Tokyo Stock Exchange last year. NARROWER DIVIDE. The online trading bonanza in Japan reflects a technology-driven change in investor behavior. After the depths of the post-bubble years, investing in the stock market was seen as a crapshoot. Most Japanese were too risk-averse to put their money into stocks, so they stashed their savings -- an estimated $12 trillion -- in bank and postal savings accounts. Even today, over half of household assets are stored in cash and deposits. But times are changing. About 10% of Japanese household assets now flows into stocks and funds. That's much less than the figure for the U.S., but analysts say the ease of Internet-based trading, mobile or otherwise, helped cure a phobia for investing long held by many Japanese, and it narrowed the gap between brokerage and stay-at-home traders. "With the Internet, the information divide between professional traders and individual investors has become very small," says Merrill Lynch chief equity strategist Masatoshi Kikuchi. Brokerages have been rushing to beef up their cell-phone services. At Kabu.com, which is owned by the Bank of Tokyo-Mitsubishi UFJ and launched its online service in 2000, account holders can check stock prices, build charts, and read company prospectuses on their phones. The brokerage hopes to offer videos of analysts talking about new trends for customers to download to handsets. SENIORS NEXT? Since October, Matsui Securities has let customers open accounts just for cell phones, rather than supplementing online accounts. It's betting that a fifth of account holders will one day log on from their cell phones, from around 12% now. E*Trade says its Web site updates every five seconds, and in February the firm plans a lottery for customers who want to buy into IPOs. By October, it will add derivatives trading. "Many of the most active cell-phone traders have been company workers going online during a lunch break," says Kabu.com CFO Takeshi Amemiya. "We think the elderly will be the next big growth sector." But this week's hair-raising drop has some analysts worried. Sky-high valuations -- at least by recent standards -- for Japanese stocks and historically high volumes of long positions in the market are already stirring talk of an impending pullback. And letting individuals buy and sell on-the-go could exacerbate swings like those seen this week. "THE HARD WAY." On Jan. 18, many of those investors created a panic by rushing to sell Internet shares including Yahoo! Japan, Softbank, and Rakuten, Japan's biggest online retailer. "Individual investors bear a lot of the blame for the selling," says Merrill's Kikuchi. By Jan. 19, the Nikkei had bounced back, adding 2.3%, closing at 15,696.28 -- its largest one-day percentage gain in three months. Will that kind of gut-wrenching volatility unnerve investors like blogger Kabuto? "Some people say new investors have to learn the hard way. But we're concerned," says Nao Otsuka, assistant manager, at Matsui Securities. A couple more shocks like this week's and Japan's greenhorn traders may decide they're better off making calls, not trades, on their handsets.  Hall and Rowley are correspondents in BusinessWeek's Tokyo bureau
BW MALL
SPONSORED LINKS
Get BusinessWeek directly on your desktop with our RSS feeds.
Buy a link now! Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2006, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
Printer-Friendly Version
