On-Line Share Trading Is Accelerating In Hong Kong

by Mary Swire, Tax-News.com, Hong Kong

01 September 2003

Online securities trading in Hong Kong was an early casualty of the dot-com meltdown and the international equity slump, with major US brokerages retreating from the SAR in 2001 almost as quickly as they had arrived in 1999 and 2000.

Now it seems that on-line trading will finally have its day in Hong Kong, as a combination of better technology, burgeoning interest from mainland visitors and the impact of SARS has pushed on-line trading volumes to historic highs.

Christina Hui Siu-wing , regional general manager for Asia at Charles Schwab Hong Kong, told the South China Morning Post this week that the company recorded its biggest trading volume in June since entering the local market in 1998.

'Know Your Customer' regulations are however a difficulty for on-line brokerages, which have to meet new customers face-to-face before opening accounts for them. Established brokerages, who can trawl among their existing customers, therefore have an advantage over new entrants to the market.

Schwab trades with its Asian customers only in US stocks, after being forced to abandon trading in local stocks in 2001, but says it has more than 300 Asian staff on its team. In 2002 Schwab recorded a 24% year-on-year increase in net new client assets and 12% growth in new account numbers. The firm says that Hong Kong investors are more active than those in the US, although only 10% of its Hong Kong customers could be classified as 'active traders' - those making more than 48 trades a year.

Hui says that the end of minimum brokerage fees in April would be helpful rather than not for the industry, by boosting overall volumes. "Commission is not the main issue when it comes to online trading,'' she says, "It is the swiftness and the availability of market information that matter.''

Overall levels of acceptance of on-line trading remain low in Hong Kong, however, with an overwhelming majority of clients preferring to trade offline with banks and brokerages. Fewer than 15% of investors have traded on-line, or say they plan to do so.

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