Brokers focus on the Net
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01/11/2002
The number of investors and brokers turning to the Internet has been steadily growing since the China Securities Regulatory Commission (CSRC) granted approval for online stock trading two years ago. "Online trading volumes and the number of accounts have been rising steadily; a sign of a breakthrough in securities dealings on the Internet," Zhou Xiaochuan, chairman of the market watchdog CSRC, was quoted as saying at a recent China E-Securities Seminar. CSRC, China's securities markets watchdog, has given approval to more than 30 brokers to operate on the Internet. According to the latest statistics from CSRC, 3.3 million investors have opened trading accounts, which account for nearly 10 per cent of all investors. In November alone, about 100,000 investors opened accounts on the Internet. The volume of online trading reached 329 billion yuan ($39.6 billion) in the first 11 months of last year. This trading volume accounted for more than 4 per cent of total transactions in the first 11 months in 2001. However, it accounts for 6.17 per cent of all the transactions in November. Five per cent is usually believed to be a break point for online trading. IT companies, including financial Internet businesses, will be able to apply for online securities brokerage licences. "Some Internet businesses are considering seeking approval to operate securities brokerages online," Zhou said. Providing domestic brokers with an edge to face forthcoming competition from foreign giants is another major stimulus for the CSRC to promote online trading. "If Chinese brokers do not change their thinking and adapt to the Internet age, they will have trouble coping with WTO challenges," warned Xu Yaping, director of the Information Centre with CSRC. Approved brokers provide online services such as securities trading, account checking and fund transferring. These services usually take much more time when using the telephone or personnel counters. Thus the possibility of unsuccessful trading could be reduced by quicker online trading service. At the same time, several securities brokers are offering discounts on commission charged for online trades, which is attractive to those who trade frequently. On the other hand, most middleaged investors, especially those who are unemployed, have formed the habit of trading by telephone or in person at counters, and are unfamiliar with Internet utilities. These "fulltime" investors may still be potential users of online trading services but they need to change their habits, which could be a difficult accomplishment. Moreover, the safety of online trading is still problematic for those who use the service frequently. Accusations of unauthorized trades by unknown people have been made by some investors. One investor applied for compensation from his brokerage after discovering some mysterious person had used his account to buy Yinguangxia, causing him to suffer a great loss. Others have claimed that they have accidentally accessed incorrect accounts when using online services, indicating that the system was not secure. It seems that there is still a long way to go before online service is mature enough to offer protection for investors while providing convenience. Chinese brokers are optimistic about the future of online trading and some are already reaping benefits. The Nanjing-based Huatai Securities Co Ltd, the biggest broker in terms of online trading, witnessed 100 per cent online trading growth yearon- year. "Thanks to online trading, we are already the ninth largest broker in China in terms of volume in spite of a 30 per cent drop in the overall market," said Wang Yijun, vice-president of Huatai. He said that online transactions would account for 15 per cent in 2002. Analysts from the International Data Corporation said online trading would contribute about 22 per cent of total transactions by 2005.
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