Online Trading Skyrockets in Wired South Korea
Sat Aug 24, 9:51 PM ET
By Judy Lee
SEOUL (Reuters) - Click, Click, Click.
That's the way most South Koreans buy and sell stocks now.
Helped by one of the world's highest Internet penetration rates, online trading has carved out a record 52 percent of total turnover on the Korean bourse, from a mere 1.9 percent in 1998.
Trading this way gives many punters an edge over conventional methods of placing orders by telephone, or face-to-face.
"It's easier, faster and cheaper," said Yoon Yong-nam, 38, a former investment banker who spends several hours each day buying and selling stocks on his home computer.
The electronic broking, or e-broking, boom has come after hefty investments in infrastructure by brokerages in the face of stiff labor costs and sharp cuts in commission fees.
It has also been made possible by the rapid spread of the Internet. About 26 million people, nearly 60 percent of South Korea ( news - web sites)'s 48 million population, were regular Internet users at the end of June.
Koreans, unfazed by the technology, regularly click a mouse to pay taxes, order pizza, buy clothes or even consult a doctor.
Online stock trading has grown dramatically in recent years.
Since e-broking was launched in Asia's third largest economy in late 1997, its proportion of the total value of trading has steadily climbed to 19 percent in 1999, 46.6 percent in 2000 and 52.3 percent last year, data from the Korea Securities Dealers Association (KSDA) shows.
In Singapore and Taiwan, e-broking accounts for around 10 percent of total trading volume and the proportion is much lower for the rest of Asia.
The KSDA said first-half stock, futures and options trading combined totaled 3,133 trillion won ($2.6 trillion) of which 1,591 trillion won, 51 percent, was done via the Internet.
HYNIX SHOWCASE
In one example of the power of e-broking, trading volume in a single stock, troubled chipmaker Hynix Semiconductor Inc, accounted for four-fifths of the total trade on June 29 on Korea's main market, where 775 companies are listed.
Brokers said the bulk of the activity in Hynix was driven by retail investors glued to their home computers.
"It's mostly retail investors and day traders," said Huh Sun-joo, a dealer at KGI Securities Co. The high-volume traders try to make profits from a slight change in prices, taking advantage of the lower trading commissions of e-broking.
Transaction commission fees through e-broking can be as low as 0.025 percent, or one-twentieth of the off-line trading fee of 0.5 percent.
The trend has stirred concerns of an earnings squeeze at the nation's 48 securities companies, although brokers said this has not really proved to be the case.
"Because of the attractiveness of lower cost, it makes people trade (shares) more often," Kim Se-joong, a spokesman for Samsung Securities Co, the largest brokerage house. "The end result on profits is almost the same."
A Korean securities firm spends between 10 billion won and 20 billion won a year to upgrade and develop home trading systems, a report in the Korea Economic Daily said.
As a result, home-traders get real-time access to a raft of public notices by companies, market reports, charts for technical analysis as well as other services, including wiring money from and to banks, aside from core function of trade.
But automation has led to redundancies at securities houses such as Samsung Securities, where the number of employees has fallen 13 percent to 2,600 over the past one and half years.
OBSTACLES
Trading from a PC clearly wins hands down in terms of convenience, but some people have security concerns.
They fear personal information, such as bank account numbers, could be leaked or worry that a computer glitch could misinterpret buy and sell orders.
There have been no major reports of online security breaches in South Korea, but there have been problems elsewhere in the region.
Although South Korea's e-broking binge has yet to really engulf other part of Asia, potential for growth looks bright.
Daewoo Securities, the third largest brokerage house in South Korea, said it signed a contract last month to help Guotaijunan Securities Co in China build an e-broking system.
"China is also keen on online trading," said Kim Hong-wook, a Daewoo spokesman. "Once all the infrastructure is set up, potential demand (for online trading) looks huge in China and other Asian countries." |
