A report entitled "Online Finance In Europe", published by JP Morgan, has concluded that UK investors have not warmed to Internet trading as much as their European counterparts and the major reason behind this is largely the mentality of the average UK investor.
Author of the report, e-finance strategist Huw van Steenis, considers that the conventional UK investor's reticence to embark upon online trading and investing is perhaps more down to a penchant for home ownership and paper share certificates rather than a fear of conducting business over the Internet. At the end of last year it was estimated that the UK represented only 8 per cent of the European online brokerage market despite accounting for one-third of European shareholders. In comparison, Germany, which has around half of the number of retail shareholders of the UK, enjoys a 52 per cent bite of European brokering activity.
Van Steenis says that on a yearly basis the UK averaged about 35 trades per online customer in the first quarter of 2000 during the technology, media and telecoms (TMT) boom. In the second and third quarters this figure reduced to 14 and 11 online transactions respectively and although the decreased applied across Europe the UK was still well below the European average. Mr Van Steenis forecasts that Germany will carry on to dominate the European online brokerage arena but will be closely followed by Italy, France, Spain and Sweden.
Not helping the UK market is the awkward nature of the regulations governing internet trading such as stamp duty and clearing and settlement processes. Van Steenis points out: 'While many smaller continental bourses moved to simpler, dematerialised, or paperless market structures years ago, Britain's older structure has left us with a more complex system. Paying for this, plus stamp duty of 0.5%, results in costs for the retail investor of three times more to trade than in Germany and five times more than in Italy and Spain.'
The report estimates that the number of German online broking clients is likely to increase from 1.8 million in 2000 to 5.2 million by the year 2003 and France will see the volume of its investors increasing from around 400,000 in 2000 to 2.5 million in 2003. The number of UK investors is expected to rise from its current figure of 300,000 to 1.8 million in 2003.
The report is optimistic over the future of European online trading activities and anticipates that the UK investors will step up their activity in this area, although the next 12 months will be unpredictable for both online investors and paper based investors as the market will be unable to match the record growth of last year, Van Steenis states: 'Over the medium term, we remain positive on the secular trend to online investing. However, we expect the profile of the growth to be highly geared to market performance.'
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