PwC Survey Highlights The Changing Face Of Hong Kong's Stockbroking Sector

Mary Swire, Tax-news.com, Hong Kong

22 March 2001

Hong Kong's stockbroking landscape is set to be transformed over the next year, according to accountancy firm PricewaterhouseCoopers (PwC), which has just issued results from a survey of 90 securities brokerage houses.

The overriding conclusion was that Internet-based share trading will become the main channel for securities dealing in the SAR, displacing the more traditional "bricks and mortar" brokers. This, plus market consolidation, will in turn lead to the disappearance of around 200 securities brokerage jobs by mid-2002. PwC partner Colin Shaftesley was quoted as saying that this would represent roughly a third of the registered brokers in Hong Kong, and that the estimate erred on the conservative side.

In addition, the PwC survey found that around 28% of traditional brokerages had no intention to move into the online scene, either because they felt they had a niche market, were not confident of even being in business in a few years, or believed they would be taken over by other brokerages as the Hong Kong market consolidates. Mr Shaftesley said that Stockmarknet Holdings, an alliance of 178 small brokerages in Hong Kong, was the first step towards a merger.

Mr Shaftesley said small brokers would find it hard to compete as they usually did not have the money needed to invest in an online trading platform. As a result, he said,the largest brokers and banks, which have the resources and expertise to develop online trading, would emerge victorious. Indeed, it was only on Monday this week that Stockmarknet said it would sign a contract with International Business Machines (IBM) to develop a HK$200m common Internet platform that will allow them to offer the same kind of online trading from individual websites as larger brokerages, but at a shared cost.

The PwC survey also showed that 77 per cent of the brokers who planned to offer online trading services in the next 12 months were keen to embark on strategic alliances, for instance with telecommunications providers, information services providers, or financial institutions. Some brokerages are ahead of the game. Karl Thomson, a listed Hong Kong brokerage, this week announced it had signed a memorandum of understanding with French-based technology firm GL Trade to spend US$5m on a joint venture to develop an online-trading platform.

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