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Non-Tech : Charles Schwab (SCH) -- A tech-stock profile? -- Ignore unavailable to you. Want to Upgrade?

To: Dalin who wrote (749)	6/28/1999 9:14:00 AM
From: stock_bull69	Respond to of 1390

TOKYO, June 28 (Reuters) - The business of trading shares over the Internet, still in its infancy in Japan, is likely to see cut-throat competition in the coming years as 20 odd start-up firms jostle for a piece of the potentially lucrative action. When the smoke clears in around five years, analysts say that only around half of the start-up outfits will be left standing and agree that international joint ventures are probably best placed to survive. The keys to success in online trading are seen as innovation, freedom from traditional structures, and a customer-focused style of management -- skills that cross-Pacific ventures like Tokio Marine & Fire Insurance Co's tie-up with U.S. broker Charles Schwab are likely to have in abundance. Major Japanese brokerages are already gearing up to fight it out with such joint ventures, as well as non-securities companies that have acquired small brokerages and small niche online trading firms. But traditional brokerages will be encumbered by the huge overhead costs of retail branch networks and accompanying staff, which newcomers specialising in online trading do not need. Few doubt the potential of the online trading business in the world's second-largest economy. Only one in around 2,400 people in Japan has a trading account, compared with one in 34 in the United States, according to Daiwa Institute of Research. Although a tiny market now, the number of people with trading accounts in Japan is expected to expand rapidly, reflecting strong growth in the number of overall Internet users. Competition is likely to start in earnest after October of this year, when stock broking commissions are fully liberalised as part of Japan's "Big Bang" deregulation of financial markets. Experts say the time is ripe to sell a new style of investment to Japanese consumers, increasingly frustrated by dismally low returns on bank deposits and eager to find ways to make their massive personal savings grow. Companies like Charles Schwab base their business strategy on giving customers the freedom to make their own investment decisions on the basis of information the brokerage provides. While free choice for the customer may be a simple idea, it promises to revolutionise securities broking in Japan. Japanese securities houses' common practice of aggressively pushing stocks they think will rise has alienated many customers in the long bear market of the 1990s. The idea that a new type of management will attract the sceptical individual investor back to the market is an attractive one for Japanese companies. "We were not interested in getting into retail broking as we have no experience in the area. But we thought that if we could do it in a way similar to Charles Schwab, that would be good," said Takehisa Kikuchi, senior managing director of Tokio Marine. Analysts say foreign companies bring critical experience in handling fluctuating trading volume to their alliances with Japanese partners. Internet trading volume can swell quickly to twenty times that of the previous day, and in the United States investors can sue if they lose money because they could not get their trades executed. But large Japanese securities firms are not likely to give in easily to upstart foreign ventures making inroads on their turf. They are well-capitalised and their large customer base is a winning card in an industry where a certain level of volume is necessary to support large initial investments in technology. "You need deep pockets to enter most Internet businesses, and a large client basis to cover costs," said Paul Heaton, senior analyst at Deutsche Securities. Without the volume to back up their business, analysts say it is unclear how small brokerages that plan to specialise as Internet-trading discount brokers, like Matsui Securities Co Ltd, will fare. The first companies to go under are expected to be small Japanese players that become unable to afford the investment required in technology. ($=121 yen)