June 17, 1999
Online Stock Trading in Japan
Gains Ahead of Deregulation
By NATSUO NISHIO
Staff Reporter of THE WALL STREET JOURNAL
TOKYO -- Online stock trading is expected to rise substantially in Japan as "Big Bang" financial deregulation forces securities companies to drastically cut their commissions.
Some brokerages plan to offer their deepest discounts to online customers due to the lower costs of Internet trading.
The 28 online brokers in Japan currently handle a total of between 60,000 and 65,000 accounts, but this is likely to double to between 120,000 and 130,000 by the end of this year, said Shogo Noguchi, an analyst at Daiwa Institute of Research.
"The number of online users is increasing by 10% per month," Mr. Noguchi said. "We had forecast 250,000 online trading accounts for the end of 2000, but we now need to revise that number up."
Online Trading Boom Spreads Beyond U.S. to Nations Abroad May 18)
Many brokerages hope that the growth of online trading in Japan will be similar to what has taken place in the U.S., where about 30% of stock trading by individual investors is estimated to be done online.
"Online trading has suddenly gained momentum since early this year, but its full-fledged growth will come after in October when (stock trading) commissions are fully liberalized," said an analyst at a medium-sized Japanese securities company.
While major Japanese securities companies have been reluctant to slash commissions, a number of smaller brokers have already announced plans to drastically reduce their fees, especially for online customers.
Matsui Securities Co., a pioneer in discount brokering, will slash its stock commissions by up to 74% from October 1. The maximum discount will go to investors who trade at least 1 million yen ($8,034) at a time via the Internet. They will only have to pay a 3,000 yen fee, a huge difference from the current 11,500 yen. Such price competition will hurt many smaller brokerages, as they rely heavily on stock brokering commissions.
Matsui has also tied up with U.S.-based Dell Computer Corp., to promote sales of Dell personal computers to Japanese individual investors who trade online.
Meanwhile, Japan's major securities companies have all established footholds in online trading.
Nikko Securities Co. set up a new online brokerage called Nikko Beans Inc. on May 20. It plans to sell stocks, investment trusts, life insurance and non-life insurance products over the Internet.
Daiwa Securities Co., the leader in the online trading business, said customer accounts at its online trading section soared by 5,000 in May. The brokerage, which first introduced small-lot online trading of stocks in April 1996, now has a total of 31,000 accounts.
There have also been a number of new entrants to online brokering, which could dramatically change the securities industry.
Major U.S. discount broker Charles Schwab & Co. and Tokio Marine & Fire Insurance Co. announced earlier in June that they will set up a joint venture securities company in Japan.
Daniel Leemon, executive vice president of the U.S. company, said it found Japan a "natural market" for Charles Schwab as the use of the Internet is expanding rapidly among Japanese consumers.
But what traditional brokers fear most is the likely entry by Sony Corp., due to the consumer electronics giant's well-known brand and financial strength.
Sony will invest 50% in a venture to be set up by an entrepreneur and former investment banker at Goldman Sachs & Co. The venture is expected to sell securities, mutual funds and offer financial services over the Internet.
Moreover, the move by Softbank Corp. and the National Association of Securities Dealers of the U.S. to set up a computerized securities market in Japan by the end of next year could further stimulate online trading.
To be called Nasdaq-Japan, the new market will allow yen-based trade of Nasdaq's 5000-plus U.S. stocks as well as index funds, and hopes to attract high growth Japanese companies.
Online securities operations will also likely break into the primary market. E*Trade Japan KK, a venture between Softbank and E*Trade Group Inc., is one of the underwriters for the initial public offering by Softbank Technology Corp.
Softbank Technology will debut on the over-the-counter market on July 23, and E*Trade Japan will underwrite 25% of the 500,000 shares offered to the public.
Industry executives acknowledge the intensifying competition, but several say they aren't totally pessimistic about the future of traditional securities companies.
"It took some 20 years for U.S. online brokers to penetrate the market, and (traditional) face-to-face services won't disappear," said Teruo Mori, president of medium-sized brokerage Yamamaru Securities Co.
"If each one of our sales agents can keep 20 regular clients, a company of Yamamaru's size can be profitable," Mr. Mori said, adding that his company managed to remain in the black in the fiscal year ended March 31 despite big losses reported by its peers.
|
